a subcontractor that is a similarly situated entity shall not 
be considered subcontracted for purposes of determining 
whether the covered small business concern has violated a 
requirement established under subsection (a) or (d). 
‘‘(c) MODIFICATIONS OF PERCENTAGES.— 
‘‘(1) IN
GENERAL.—The Administrator may 
change, by rule (after providing notice and an oppor-
tunity for public comment), a percentage specified in 
paragraphs (1) through (4) of subsection (a) if the 
Administrator determines that such change is nec-
essary to reflect conventional industry practices 
among business concerns that are below the numerical 
size standard for businesses in that industry category. 
‘‘(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 subsection (a) 
does not apply, the Administrator is authorized to es-
tablish, by rule (after providing notice and an oppor-
tunity for public comment), a requirement that a cov-
ered small business concern may not expend on sub-
contractors more than a specified percentage of the 
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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. 
‘‘(3) CONSTRUCTION PROJECTS.—The Adminis-
trator shall establish, through public rulemaking, re-
quirements similar to those specified in paragraph 
(1) to be applicable to contracts for general and spe-
cialty construction and to contracts for any other in-
dustry category not otherwise subject to the require-
ments of such paragraph. The percentage applicable 
to any such requirement shall be determined in ac-
cordance with paragraph (2). 
‘‘(e) DEFINITIONS.—In this section, the following defi-
nitions apply: 
‘‘(1) COVERED SMALL BUSINESS CONCERN.—The 
term ‘covered small business concern’ means a busi-
ness 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; 
‘‘(B) with respect to a contract awarded 
under section 8(m)— 
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‘‘(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 defined in that 
section) that is not less than 51 percent 
owned by 1 or more women who are eco-
nomically disadvantaged (and such owner-
ship is determined without regard to any 
community property law); 
‘‘(C) with respect to a contract awarded 
under section 15(a), is a small business concern; 
‘‘(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— 
‘‘(A) if a subcontractor for a small business 
concern, is a small business concern; 
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‘‘(B) if a subcontractor for a small business 
concern eligible to receive contracts under section 
8(a), is such a concern; 
‘‘(C) if a subcontractor for a small business 
concern owned and controlled by women (as de-
fined in section 8(m)), is such a concern; 
‘‘(D) if a subcontractor for a small business 
concern owned and controlled by women (as de-
fined in section 8(m)) that is not less than 51 
percent owned by 1 or more women who are eco-
nomically 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 con-
cern; or 
‘‘(F) if a subcontractor for a small business 
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.— 
‘‘(1) IN GENERAL.—Whoever violates a require-
ment established under section 45 shall be subject to 
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the penalties prescribed in subsection (d), except that, 
for an entity that exceeded a limitation on subcon-
tracting under such section, the fine described in sub-
section (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 Adminis-
trator shall take such actions as are necessary to en-
sure that an existing Federal subcontracting reporting 
system is modified to notify the Administrator, the 
appropriate Director of the Office of Small and Dis-
advantaged 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 subclause 
(III) and inserting the following: 
‘‘(III) with respect to any sub-
contract entered into by the small busi-
ness concern pursuant to a contract 
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awarded to the small business concern 
under section 31, the small business 
concern will ensure that the require-
ments of section 45 are satisfied; and’’; 
(2) by striking subparagraphs (B) and (C); and 
(3) by redesignating subparagraph (D) as sub-
paragraph (B). 
(b) ENTITIES ELIGIBLE FOR CONTRACTS UNDER SEC-
TION 8(a).—Section 8(a) of such Act (15 U.S.C. 637(a)) 
is amended by striking paragraph (14) and inserting the 
following: 
‘‘(14) LIMITATIONS
ON
SUBCONTRACTING.—A 
concern may not be awarded a contract under this 
subsection as a small business concern unless the con-
cern 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 subsection (o) 
and inserting the following: 
‘‘(o) LIMITATIONS ON SUBCONTRACTING.—A concern 
may not be awarded a contract under subsection (a) as a 
small business concern unless the concern agrees to satisfy 
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 Admin-
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istration shall issue guidance with respect to compliance 
with the changes made to the Small Business Act by the 
amendments in this Act, with opportunities for notice and 
comment. 
TITLE II—SUBCONTRACTING 
PLANS 
SEC. 201. SUBCONTRACTING PLANS. 
(a) SUBCONTRACTING REPORTING REQUIREMENTS.— 
(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— 
‘‘(I) not later than 180 days after 
the date on which performance under 
the applicable contract begins, and 
every 180 days thereafter until con-
tract performance ends, a report that 
describes all subcontracting activities 
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under the contract during the pre-
ceding 180-day period; 
‘‘(II) not later than 1 year after 
the date on which performance under 
the applicable contract begins, and an-
nually thereafter until contract per-
formance ends, a report that describes 
all subcontracting activities under the 
contract that have occurred before the 
date on which the report is submitted 
(except that, with respect to the De-
partment of Defense and the National 
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 applicable contract ends, a report 
that describes all subcontracting activi-
ties under the contract; and 
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‘‘(ii) cooperate with any study or sur-
vey required by the applicable Federal agen-
cy or the Administration to determine the 
extent of compliance by the offeror or bidder 
with the subcontracting plan;’’; and 
(C) by moving the margins for subpara-
graphs (A), (B), (C), (D), and (F) 2 ems to the 
right (so that the align with subparagraph (E), 
as amended by subparagraph (B) of this para-
graph). 
(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 reporting 
system to which covered reports are submitted is 
modified to notify the Administrator, the appro-
priate contracting officer, and the appropriate 
Director of Small and Disadvantaged Business 
Utilization if an entity fails to submit a re-
quired 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 Administrator may 
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not carry out or establish any pilot program 
until the date the Administrator modifies the re-
porting 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 REPORTS 
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 ‘‘subsection, 
or’’ and inserting ‘‘subsection,’’; 
(3) in subparagraph (B) by striking ‘‘sub-
contract,’’ and inserting ‘‘subcontract, or’’; 
(4) by inserting after subparagraph (B) the fol-
lowing: 
‘‘(C) assurances provided under paragraph 
(6)(E),’’; and 
(5) by moving the margins of subparagraphs 
(A), (B), and the matter following subparagraph (B) 
2 ems to the right. 
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(c) AUTHORITY OF SMALL BUSINESS ADMINISTRA-
TION.—Section 8(d)(10) of such Act (15 U.S.C. 637(d)(10)) 
is amended— 
(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,’’; 
(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 con-
tract-by-contract basis or, in the case of contractors’’; 
and 
(4) by moving the margins of subparagraphs (A) 
through (C) 2 ems to the right. 
(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 representa-
tive determines that a subcontracting plan re-
quired under paragraph (4) or (5) fails to pro-
vide the maximum practicable opportunity for 
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covered small business concerns to participate in 
the performance of the contract to which the plan 
applies, such representative may delay accept-
ance of the plan in accordance with subpara-
graph (B). 
‘‘(B) PROCESS.—A procurement center rep-
resentative or commercial market representative 
who makes the determination under subpara-
graph (A) with respect to a subcontracting plan 
may delay acceptance of the plan for a 30-day 
period by providing written notice of such deter-
mination to appropriate personnel of the con-
tracting agency. Such notice shall include rec-
ommendations for altering the plan to provide 
the maximum practicable opportunity described 
in that subparagraph. 
‘‘(C) DISAGREEMENTS.—If a procurement 
center representative or commercial market rep-
resentative delays the acceptance of a subcon-
tracting 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 pro-
vide the maximum practicable opportunity de-
scribed in subparagraph (A), the disagreement 
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shall be submitted to the head of the contracting 
agency by the Administrator for a final deter-
mination. 
‘‘(D) COVERED SMALL BUSINESS CONCERNS 
DEFINED.—In this paragraph, the term ‘covered 
small business concerns’ means small business 
concerns, qualified HUBZone small business 
concerns, small business concerns owned and 
controlled by veterans, small business concerns 
owned and controlled by service-disabled vet-
erans, small business concerns owned and con-
trolled by socially and economically disadvan-
taged individuals, and small business concerns 
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 Busi-
ness Daily’’ and inserting ‘‘on the appropriate Federal 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 Admin-
istration shall issue guidance with respect to the changes 
made to the Small Business Act, with opportunity for notice 
and comment. 
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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 following: 
‘‘(F) Conversion of a function that is being 
performed by a small business concern to per-
formance 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), means a small business 
concern (as that term is defined in section 3(a) 
of the Small Business Act) whose economic inter-
est 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: 
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‘‘SEC. 46. INSOURCING. 
‘‘A Federal agency may only convert a function that 
is being performed by a small business concern to perform-
ance by a Federal employee if— 
‘‘(1) the agency has made publicly available, 
after providing notice and an opportunity for public 
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 paragraph 
are reviewed by any appropriate— 
‘‘(A) Office of Small and Disadvantaged 
Business Utilization; and 
‘‘(B) procurement center representative.’’. 
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Union Calendar No. 534 
112TH CONGRESS 
2D SESSION 
H. R. 3893 
[Report No. 112–731, Part I] 
A BILL 
To amend the Small Business Act with respect to 
subcontracting and insourcing, and for other pur-
poses. 
DECEMBER 27, 2012 
Reported from the Committee on Small Business with an 
amendment 
DECEMBER 27, 2012 
The Committee on Oversight and Government Reform 
discharged; committed to the Committee of the Whole 
House on the State of the Union and ordered to be 
printed 
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