I 
112TH CONGRESS 
2D SESSION 
H. R. 3893 
To amend the Small Business Act with respect to subcontracting and 
insourcing, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 2, 2012 
Mr. MULVANEY introduced the following bill; which was referred to the Com-
mittee on Small Business, and in addition to the Committee on Oversight 
and Government Reform, for a period to be subsequently determined by 
the Speaker, in each case for consideration of such provisions as fall with-
in the jurisdiction of the committee concerned 
A BILL 
To amend the Small Business Act with respect to 
subcontracting and insourcing, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Subcontracting Transparency and Reliability Act of 
2012’’. 
(b) TABLE OF CONTENTS.— 
Sec. 1. Short title; table of contents. 
TITLE I—LIMITATIONS ON SUBCONTRACTING 
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Sec. 101. Limitations on subcontracting. 
Sec. 102. Penalties. 
Sec. 103. Conforming amendments. 
Sec. 104. Guidance. 
TITLE II—SUBCONTRACTING PLANS 
Sec. 201. Subcontracting plans. 
Sec. 202. Notices of subcontracting opportunities. 
TITLE III—INSOURCING 
Sec. 301. Definitions relating to procurement protest system. 
Sec. 302. Insourcing. 
TITLE I—LIMITATIONS ON 
SUBCONTRACTING 
SEC. 101. LIMITATIONS ON SUBCONTRACTING. 
The Small Business Act (15 U.S.C. 631 et seq.) is 
amended— 
(1) by redesignating section 45 as section 47; 
and 
(2) by inserting after section 44 the following: 
‘‘SEC. 45. LIMITATIONS ON SUBCONTRACTING. 
‘‘(a) IN GENERAL.—If awarded a contract under sec-
tion 8(a), 8(m), 15(a), 31, or 36, a covered small business 
concern— 
‘‘(1) in the case of a contract for services (ex-
cept construction), may not expend on subcontrac-
tors more than 50 percent of the amount paid to the 
concern under the contract; 
‘‘(2) in the case of a contract for general con-
struction, may not expend on subcontractors more 
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than 85 percent of the amount, less the cost of ma-
terials, paid to the concern under the contract; 
‘‘(3) in the case of a contract for construction 
by a special trade contractor, may not expend on 
subcontractors more than 75 percent of the amount, 
less the cost of materials, paid to the concern under 
the contract; 
‘‘(4) in the case of a contract for supplies 
(other than from a regular dealer in such supplies), 
may not expend on subcontractors more than 50 
percent of the amount, less the cost of materials, 
paid to the concern under the contract; 
‘‘(5) in the case of a contract described in more 
than 1 of paragraphs (1) through (4)— 
‘‘(A) shall determine for which category of 
services or supplies, described in 1 of para-
graphs (1) through (4), the greatest percentage 
of the contract amount is awarded; 
‘‘(B) shall determine the amount awarded 
under the contract for that category of services 
or supplies; and 
‘‘(C) may not expend on subcontractors, 
with respect to the amount determined under 
subparagraph (B), more than— 
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‘‘(i) 50 percent of that amount, if the 
category of services or supplies applicable 
under subparagraph (A) is described in 
paragraph (1); 
‘‘(ii) 85 percent of that amount, if the 
category of services or supplies applicable 
under subparagraph (A) is described in 
paragraph (2); 
‘‘(iii) 75 percent of that amount, if 
the category of services or supplies applica-
ble under subparagraph (A) is described in 
paragraph (3); and 
‘‘(iv) 50 percent of that amount, if the 
category of services or supplies applicable 
under subparagraph (A) is described in 
paragraph (4); and 
‘‘(6) in the case of a contract for supplies from 
a regular dealer in such supplies, shall supply the 
product of a domestic small business manufacturer 
or processor, unless a waiver of such requirement is 
granted— 
‘‘(A) by the Administrator, after reviewing 
a determination by the applicable contracting 
officer that no small business manufacturer or 
processor can reasonably be expected to offer a 
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‘‘(2) UNIFORMITY.—A change to a percentage 
under paragraph (1) shall apply to all covered small 
business concerns. 
‘‘(d) OTHER CONTRACTS.— 
‘‘(1) IN GENERAL.—With respect to a category 
of contracts to which a requirement under sub-
section (a) does not apply, the Administrator is au-
thorized to establish, by rule (after providing notice 
and an opportunity for public comment), a require-
ment that a covered small business concern may not 
expend on subcontractors more than a specified per-
centage of the amount paid to the concern under a 
contract in that category. 
‘‘(2) UNIFORMITY.—A requirement established 
under paragraph (1) shall apply to all covered small 
business concerns. 
‘‘(e) DEFINITIONS.—In this section, the following 
definitions apply: 
‘‘(1) COVERED SMALL BUSINESS CONCERN.— 
The term ‘covered small business concern’ means a 
business concern that— 
‘‘(A) with respect to a contract awarded 
under section 8(a), is a small business concern 
eligible to receive contracts under that section; 
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‘‘(B) with respect to a contract awarded 
under section 8(m)— 
‘‘(i) is a small business concern owned 
and controlled by women (as defined in 
that section); or 
‘‘(ii) is a small business concern 
owned and controlled by women (as de-
fined in that section) that is not less than 
51 percent owned by 1 or more women 
who are economically disadvantaged (and 
such ownership is determined without re-
gard to any community property law); 
‘‘(C) with respect to a contract awarded 
under section 15(a), is a small business con-
cern; 
‘‘(D) with respect to a contract awarded 
under section 31, is a qualified HUBZone small 
business concern; or 
‘‘(E) with respect to a contract awarded 
under section 36, is a small business concern 
owned and controlled by service-disabled vet-
erans. 
‘‘(2) SIMILARLY SITUATED ENTITY.—The term 
‘similarly situated entity’ means a subcontractor 
that— 
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‘‘(A) if a subcontractor for a small busi-
ness concern, is a small business concern; 
‘‘(B) if a subcontractor for a small busi-
ness concern eligible to receive contracts under 
section 8(a), is such a concern; 
‘‘(C) if a subcontractor for a small busi-
ness concern owned and controlled by women 
(as defined in section 8(m)), is such a concern; 
‘‘(D) if a subcontractor for a small busi-
ness concern owned and controlled by women 
(as defined in section 8(m)) that is not less 
than 51 percent owned by 1 or more women 
who are economically disadvantaged (and such 
ownership is determined without regard to any 
community property law), is such a concern; 
‘‘(E) if a subcontractor for a qualified 
HUBZone small business concern, is such a 
concern; or 
‘‘(F) if a subcontractor for a small busi-
ness concern owned and controlled by service- 
disabled veterans, is such a concern.’’. 
SEC. 102. PENALTIES. 
Section 16 of the Small Business Act (15 U.S.C. 645) 
is amended by adding at the end the following: 
‘‘(g) SUBCONTRACTING LIMITATIONS.— 
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‘‘(1) IN GENERAL.—Whoever violates a require-
ment established under section 45 shall be subject to 
the penalties prescribed in subsection (d), except 
that, for an entity that exceeded a limitation on sub-
contracting under such section, the fine described in 
subsection (d)(2)(A) shall be treated as the greater 
of— 
‘‘(A) $500,000; or 
‘‘(B) the dollar amount expended, in excess 
of permitted levels, by the entity on subcontrac-
tors. 
‘‘(2) MONITORING.—Not later than 1 year after 
the date of enactment of this subsection, the Admin-
istrator shall take such actions as are necessary to 
ensure that an existing Federal subcontracting re-
porting system is modified to notify the Adminis-
trator, the appropriate Director of the Office of 
Small and Disadvantaged Business Utilization, and 
the appropriate contracting officer if a requirement 
established under section 45 is violated.’’. 
SEC. 103. CONFORMING AMENDMENTS. 
(a) HUBZONES.—Section 3(p)(5) of the Small Busi-
ness Act (15 U.S.C. 632(p)(5)) is amended— 
(1) in subparagraph (A)(i) by striking sub-
clause (III) and inserting the following: 
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‘‘(III) with respect to any sub-
contract entered into by the small 
business concern pursuant to a con-
tract awarded to the small business 
concern under section 31, the small 
business concern will ensure that the 
requirements of section 45 are satis-
fied; and’’; 
(2) by striking subparagraphs (B) and (C); and 
(3) by redesignating subparagraph (D) as sub-
paragraph (B). 
(b) ENTITIES ELIGIBLE
FOR CONTRACTS UNDER 
SECTION 8(a).—Section 8(a) of such Act (15 U.S.C. 
637(a)) is amended by striking paragraph (14) and insert-
ing the following: 
‘‘(14) LIMITATIONS ON SUBCONTRACTING.—A con-
cern may not be awarded a contract under this subsection 
as a small business concern unless the concern agrees to 
satisfy the requirements of section 45.’’. 
(c) SMALL BUSINESS CONCERNS.—Section 15 of 
such Act (15 U.S.C. 644) is amended by striking sub-
section (o) and inserting the following: 
‘‘(o) LIMITATIONS ON SUBCONTRACTING.—A concern 
may not be awarded a contract under subsection (a) as 
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a small business concern unless the concern agrees to sat-
isfy the requirements of section 45.’’. 
SEC. 104. REGULATIONS. 
Not later than 180 days after the date of enactment 
of this Act, the Administrator of the Small Business Ad-
ministration shall issue guidance with respect to compli-
ance with the changes made to the Small Business Act 
by the amendments in this Act, with opportunities for no-
tice and comment. 
TITLE II—SUBCONTRACTING 
PLANS 
SEC. 201. SUBCONTRACTING PLANS. 
(a) 
SUBCONTRACTING
REPORTING
REQUIRE-
MENTS.— 
(1) IN GENERAL.—Section 8(d)(6) of the Small 
Business Act (15 U.S.C. 637(d)(6)) is amended— 
(A) by striking ‘‘(6) Each subcontracting 
plan’’ and inserting the following: 
‘‘(6) SUBCONTRACTING
PLAN
REQUIREMENTS.— 
Each subcontracting plan’’; 
(B) by amending subparagraph (E) to read 
as follows: 
‘‘(E) assurances that the offeror or bidder 
will— 
‘‘(i) submit— 
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‘‘(I) not later than 180 days after the 
date on which performance under the ap-
plicable contract begins, and every 180 
days thereafter until contract performance 
ends, a report that describes all subcon-
tracting activities under the contract dur-
ing the preceding 180-day period; 
‘‘(II) not later than 1 year after the 
date on which performance under the ap-
plicable contract begins, and annually 
thereafter until contract performance ends, 
a report that describes all subcontracting 
activities under the contract that have oc-
curred before the date on which the report 
is submitted (except that, with respect to 
the Department of Defense and the Na-
tional Aeronautics and Space Administra-
tion, a report under this subclause shall be 
submitted not later than 180 days after 
the date on which contract performance 
begins and every 180 days thereafter until 
contract performance ends); and 
‘‘(III) not later than 30 days after the 
date on which performance under the ap-
plicable contract ends, a report that de-
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scribes all subcontracting activities under 
the contract; and 
‘‘(ii) cooperate with any study or survey 
required by the applicable Federal agency or 
the Administration to determine the extent of 
compliance by the offeror or bidder with the 
subcontracting plan;’’; and 
(C) by moving subparagraph (G), including 
each clause therein, 2 ems to the left. 
(2) REPORTING SYSTEM MODIFICATION.— 
(A) IN GENERAL.—Not later than 1 year 
after the date of enactment of this Act, the Ad-
ministrator of the Small Business Administra-
tion shall take such actions as are necessary to 
ensure that the Federal subcontracting report-
ing system to which covered reports are sub-
mitted is modified to notify the Administrator, 
the appropriate contracting officer, and the ap-
propriate Director of Small and Disadvantaged 
Business Utilization if an entity fails to submit 
a required covered report. If the Administrator 
does not modify the subcontracting reporting 
system on or before the date that is 1 year 
after the date of enactment of this Act, the Ad-
ministrator may not carry out or establish any 
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pilot program until the date the Administrator 
modifies the reporting system. 
(B) COVERED REPORT DEFINED.—In this 
paragraph, the term ‘‘covered report’’ means a 
report submitted in accordance with assurances 
provided under section 8(d)(6)(E) of the Small 
Business Act (15 U.S.C. 637(d)(6)(E)). 
(b) FAILURE TO SUBMIT SUBCONTRACTING RE-
PORTS AS BREACH OF CONTRACT.—Section 8(d)(8) of 
such Act (15 U.S.C. 637(d)(8)) is amended— 
(1) by striking ‘‘(8) The failure’’ and inserting 
the following: 
‘‘(8) MATERIAL BREACH.—The failure’’; 
(2) in subparagraph (A) by striking ‘‘sub-
section, or’’ and inserting ‘‘subsection,’’; 
(3) in subparagraph (B) by striking ‘‘sub-
contract,’’ and inserting ‘‘subcontract, or’’; and 
(4) by inserting after subparagraph (B) the fol-
lowing: 
‘‘(C) assurances provided under paragraph 
(6)(E),’’. 
(c) AUTHORITY OF SMALL BUSINESS ADMINISTRA-
TION.—Section 8(d)(10) of such Act (15 U.S.C. 
637(d)(10)) is amended— 
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(1) by striking ‘‘(10) In the case of’’ and insert-
ing the following: 
‘‘(10) AUTHORITY OF ADMINISTRATION.—In the case 
of’’; 
(2) in subparagraph (B) by striking ‘‘, which 
shall be advisory in nature,’’; and 
(3) in subparagraph (C) by striking ‘‘, either on 
a contract-by-contract basis, or in the case contrac-
tors’’ and inserting ‘‘as a supplement to evaluations 
performed by the contracting agency, either on a 
contract-by-contract basis or, in the case of contrac-
tors’’. 
(d) APPEALS.—Section 8(d) of such Act (15 U.S.C. 
637(d)) is amended by adding at the end the following: 
‘‘(13) APPEALS.— 
‘‘(A) IN
GENERAL.—If a procurement center 
representative or commercial market representative 
determines that a subcontracting plan required 
under paragraph (4) or (5) fails to provide the max-
imum practicable opportunity for covered small busi-
ness concerns to participate in the performance of 
the contract to which the plan applies, such rep-
resentative may delay acceptance of the plan in ac-
cordance with subparagraph (B). 
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‘‘(B) PROCESS.—A procurement center rep-
resentative or commercial market representative who 
makes the determination under subparagraph (A) 
with respect to a subcontracting plan may delay ac-
ceptance of the plan for a 30-day period by pro-
viding written notice of such determination to appro-
priate personnel of the contracting agency. Such no-
tice shall include recommendations for altering the 
plan to provide the maximum practicable oppor-
tunity described in that subparagraph. 
‘‘(C) DISAGREEMENTS.—If a procurement cen-
ter representative or commercial market representa-
tive delays the acceptance of a subcontracting plan 
under subparagraph (B) for a 30-day period and, 
during such period, does not reach agreement with 
appropriate personnel of the contracting agency to 
alter the plan to provide the maximum practicable 
opportunity described in subparagraph (A), the dis-
agreement shall be submitted to the head of the con-
tracting agency by the Administrator for a final de-
termination. 
‘‘(D) COVERED
SMALL
BUSINESS
CONCERNS 
DEFINED.—In this paragraph, the term ‘covered 
small business concerns’ means small business con-
cerns, qualified HUBZone small business concerns, 
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small business concerns owned and controlled by vet-
erans, small business concerns owned and controlled 
by service-disabled veterans, small business concerns 
owned and controlled by socially and economically 
disadvantaged individuals, and small business con-
cerns owned and controlled by women.’’. 
SEC. 202. NOTICES OF SUBCONTRACTING OPPORTUNITIES. 
Section 8(k)(1) of the Small Business Act (15 U.S.C. 
637(k)(1)) is amended by striking ‘‘in the Commerce 
Business Daily’’ and inserting ‘‘on the appropriate Fed-
eral Web site (as determined by the Administrator)’’. 
SEC. 203. REGULATIONS. 
Not later than 180 days after the date of enactment 
of this Act, the Administrator of the Small Business Ad-
ministration shall issue guidance with respect to the 
changes made to the Small Business Act, with opportunity 
for notice and comment. 
TITLE III—INSOURCING 
SEC. 301. DEFINITIONS RELATING TO PROCUREMENT PRO-
TEST SYSTEM. 
(a) PROTEST.—Section 3551(1) of title 31, United 
States Code, is amended by adding at the end the fol-
lowing: 
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‘‘(F) Conversion of a function that is being 
performed by a private sector entity to perform-
ance by a Federal employee.’’. 
(b) INTERESTED PARTY.—Section 3551(2) of such 
title is amended— 
(1) in subparagraph (A) by striking ‘‘and’’ at 
the end; 
(2) in subparagraph (B) by striking the period 
at the end and inserting ‘‘; and’’; and 
(3) by adding at the end the following: 
‘‘(C) with respect to a conversion described 
in paragraph (1)(F), includes any small busi-
ness concern (as that term is defined in section 
3(a) of the Small Business Act) whose economic 
interest would be affected by the conversion.’’. 
SEC. 302. INSOURCING. 
The Small Business Act (15 U.S.C. 631 et seq.), as 
amended by this Act, is further amended by inserting after 
section 45 the following: 
‘‘SEC. 46. INSOURCING. 
‘‘A Federal agency may only convert a function that 
is being performed by a small business concern to per-
formance by a Federal employee if— 
‘‘(1) the agency has made publicly available, 
after providing notice and an opportunity for public 
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comment, the procedures of the agency with respect 
to decisions to convert a function being performed 
by a small business concern to performance by a 
Federal employee; and 
‘‘(2) the procedures described in paragraph (1) 
include that all decisions described in such para-
graph are reviewed by any appropriate— 
‘‘(A) Office of Small and Disadvantaged 
Business Utilization; and 
‘‘(B) procurement center representative.’’. 
Æ 
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