I
104TH CONGRESS
2D SESSION
H. R. 3994
To amend the Small Business Act to provide comprehensive and structured
business development assistance to emerging small business concerns
owned by economically disadvantaged individuals to foster their entre-
preneurial potential and marketplace success, without relying on pref-
erential award of Government contracts, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
AUGUST 2, 1996
Mrs. MEYERS of Kansas introduced the following bill; which was referred to
the Committee on Small Business
A BILL
To amend the Small Business Act to provide comprehensive
and structured business development assistance to
emerging small business concerns owned by economically
disadvantaged individuals to foster their entrepreneurial
potential and marketplace success, without relying on
preferential award of Government contracts, 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.
This Act may be cited as the ‘‘Entrepreneur Develop-
ment Program Act of 1996’’.
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‘‘(i) is at least 51 percent uncondi-
tionally owned by
‘‘(I) one or more eligible individ-
uals,
‘‘(II) an Indian tribe (or a wholly
owned business entity of such tribe),
or
‘‘(III) a Native Hawaiian organi-
zation, or
‘‘(ii) in the case of any publicly-owned
business, at least 51 percent of the stock
of such concern is unconditionally owned
by
‘‘(I) one or more eligible individ-
uals,
‘‘(II) an Indian tribe (or a wholly
owned business entity of such tribe),
or
‘‘(III) a Native Hawaiian organi-
zation.
‘‘(C) CONTROL OF DAILY BUSINESS OPER-
ATIONS.—A concern meets the requirements of
this subparagraph if the management and daily
business operations of such concern are con-
trolled by one or more eligible individuals, an
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Indian tribe, or a Native Hawaiian organiza-
tion.
‘‘(D) EMERGING
SMALL
BUSINESS
CON-
CERN.—For the purposes of this subsection, the
term emerging small business concern means a
small business concern the size of which is less
than or equal to 25 percent of the numerical
size standard for the standard industrial classi-
fication that encompasses the principal line of
business of such concern.
‘‘(E) ELIGIBLE INDIVIDUAL.—For partici-
pation in the program, an individual must not
have a net worth in excess of $250,000, exclud-
ing from such computation the value of the per-
son’s investment in the emerging small business
concern that will participate in the Program.
‘‘(3) 
OUTREACH
FOR
PROGRAM
PARTICI-
PANTS.—The Administration shall develop and im-
plement an outreach program to inform and recruit
eligible concerns to apply for the Program. Such
outreach program shall make a sustained and sub-
stantial effort to solicit Program applications from
small business concerns located within States having
relatively few Program Participants.
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‘‘(4) DETERMINATIONS OF INDIVIDUAL ELIGI-
BILITY.—
‘‘(A) DIVISION
OF
PROGRAM
CERTIFI-
CATION
AND
ELIGIBILITY
ESTABLISHED.—
There is established a Division of Program Cer-
tification and Eligibility (hereinafter referred to
as the ‘Division’). The Division shall be headed
by a Director who shall report to the Associate
Administrator responsible for the Program.
‘‘(B) RESPONSIBILITIES
OF
THE
DIVI-
SION.—The responsibilities of the Division are
to—
‘‘(i) receive, review, and evaluate ap-
plications for certification as a Program
Participant pursuant to the eligibility cri-
teria in paragraph (2);
‘‘(ii) advise each Program applicant
within 15 days after the receipt of an ap-
plication as to whether such application is
complete and suitable for evaluation and, if
not, what matters must be rectified;
‘‘(iii) render recommendations on such
applications to the Associate Administrator
for the Program;
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‘‘(iv) review and evaluate financial
statements and other submissions from
Program Participants;
‘‘(v) make requests for the initiation
of termination or graduation proceedings,
as appropriate, to the Associate Adminis-
trator;
‘‘(vi) make recommendations to the
Associate Administrator concerning re-
quests for reconsideration or challenges
from applicants that have been denied pro-
gram admission; and
‘‘(vii) decide protests regarding the
current eligibility a Program Participant
for continued Program participation.
‘‘(C) DEADLINE FOR ACTION ON PROGRAM
APPLICATIONS.—Not later than 90 days after
receipt of a completed application for Program
certification, the Associate Administrator for
the Program shall certify a small business con-
cern as a Program Participant or shall deny
such application.
‘‘(D) ADDITIONAL LIMITATIONS ON PRO-
GRAM ELIGIBILITY.—
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‘‘(i) Except for an Indian tribe or a
Native Hawaiian organization, no individ-
ual upon whom the eligibility of a firm
which graduated from the Minority Small
Business and Capital Ownership Develop-
ment Program before the effective date of
this subsection shall be eligible to assert
such status with respect to any other busi-
ness concern making application for the
Program certification after such effective
date.
‘‘(ii) Except in the case of an Indian
tribe or a Native Hawaiian organization,
an individual upon whom eligibility is
based pursuant to paragraph (2) shall be
permitted to assert such Program eligi-
bility for only one small business concern.
‘‘(iii) No concern shall be subse-
quently recertified for Program participa-
tion if its prior Program participation was
concluded for any of the reasons described
in paragraph (9).
‘‘(5) DURATION OF PARTICIPATION.—The term
of participation in the Program shall be five years
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from the date of certification as a Program Partici-
pant.
‘‘(6) BUSINESS PLANNING.—
‘‘(A) PLAN
REQUIRED.—Each concern
making application to the Program and each
Program Participant shall submit to the Ad-
ministration a business plan (referred to as the
‘business plan’), addressing the matters de-
scribed in subparagraph (B).
‘‘(B) 
CONTENTS
OF
THE
BUSINESS
PLAN.—For the purposes of subparagraph (A),
a business plan shall include the following:
‘‘(i) An analysis of market potential,
competitive environment, and other busi-
ness analyses estimating the firm’s pros-
pects for profitable operations during its
Program participation term and after
graduation.
‘‘(ii) An analysis of the firm’s busi-
ness strengths and weaknesses with par-
ticular attention to correcting any finan-
cial, managerial, technical, or personnel
weaknesses which are likely to impede the
business development of the firm.
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‘‘(iii) Specific targets, objectives, and
goals for the firms business development
during the next year and each succeeding
year of its Program participation term and
three years after exiting the Program, uti-
lizing the results of the analyses conducted
pursuant to clauses (i) and (ii).
‘‘(iv) Continuous attention regarding
the Program Participant’s successful tran-
sition to sustainable business operations
after exiting the Program.
‘‘(C) MAINTAINING A CURRENT BUSINESS
PLAN.—Each Program Participant shall annu-
ally review its currently approved plan with its
Business Opportunity Specialist and modify
such plan as may be appropriate. Any modified
plan shall be submitted to the Administration
for approval. The currently approved plan shall
be considered valid until such time as a modi-
fied plan is approved.
‘‘(7) FORMS OF ASSISTANCE.—
‘‘(A) IN
GENERAL.—The assistance pro-
vided to a Program Participant may include—
‘‘(i) developing and maintaining the
Program Participant’s business plan;
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‘‘(ii) providing access to training and
assistance in general business management
(including, but not limited to, organiza-
tional management, financial management,
personnel management, marketing, and
proposal development);
‘‘(iii) facilitating access to debt fi-
nancing through guaranteed loans made
pursuant to section 7(a) and other means;
‘‘(iv) facilitating access to equity fi-
nancing through the Small Business In-
vestment Company Program and other
means; and
‘‘(v) facilitating access to adequate
surety bonding through the surety bond
guarantee programs authorized by part B
of title IV of the Small Business Invest-
ment Act of 1958.
‘‘(B) USE
OF
PRIVATE
SECTOR
PART-
NERS.—
‘‘(i) The Administration may provide
financial assistance to public or private or-
ganizations to undertake the activities de-
scribed in paragraph (A).
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‘‘(ii) Such financial assistance may be
provided through contract, grant or coop-
erative agreement, as may be appropriate.
‘‘(iii) The Administration is author-
ized to make payments under contracts,
grants, or cooperative agreements entered
into under this paragraph in lump sum or
installments, in advance or by way of reim-
bursement, making any necessary adjust-
ments for overpayments or underpayments.
‘‘(8) 
VERIFICATION
OF
INDIVIDUAL
ELIGI-
BILITY.—
‘‘(A) ANNUAL CERTIFICATION OF OWNER-
SHIP AND CONTROL.—Each Program Partici-
pant shall certify, on an annual basis, that it
meets the requirements of paragraph (2)(C) re-
garding ownership and control.
‘‘(B) ANNUAL
FINANCIAL
STATEMENT.—
Each Program Participant shall annually sub-
mit to the Administration such information as
may be necessary for the Administration to
make a determination of continued eligibility
for Program participation, including a personal
financial statement from each owner.
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‘‘(C) PROMPT NOTIFICATION OF CHANGE
OF OWNERSHIP REQUIRED.—A Program Partic-
ipant shall notify the Administrator imme-
diately upon entering an agreement (either oral
or in writing) to transfer all or part of its stock
or other ownership interest to any other party.
‘‘(D) SPECIAL RULE FOR TRANSFERS TO
SMALL
BUSINESS
INVESTMENT
COMPANIES.—
For the purposes of determining ownership and
control of a Program Participant, any potential
ownership interests held by investment compa-
nies licensed under the Small Business Invest-
ment Act of 1958 shall be treated in the same
manner as interests held by the individuals
upon whom Program eligibility is based.
‘‘(E) STATUS REVIEW.—
‘‘(i) Whenever the Administration has
reason to believe, based upon specific and
credible information, that a Program Par-
ticipant no longer meets the requirements
for the Program, the Administration shall
conduct a review, and if appropriate, take
remedial action.
‘‘(ii) If the Administration determines,
pursuant to such review, that a Program
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Participant (other than an Indian tribe or
a Native Hawaiian Organization) or its
owners are no longer eligible, a termination
proceeding shall be commenced.
‘‘(9) TERMINATION OF PARTICIPATION.—
‘‘(A) IN
GENERAL.—A Program Partici-
pant shall cease to be a Program Participant,
if such firm—
‘‘(i) voluntarily elects not to continue
Program participation;
‘‘(ii) completes its term of Program
participation;
‘‘(iii) is terminated from Program
participation pursuant to a termination
proceeding; or
‘‘(iv) is graduated pursuant to a grad-
uation proceeding.
‘‘(B) TERMINATION.—
‘‘(i) DEFINITION.—For the purposes
of this subsection, the term ‘termination’
(or ‘terminated’) means the total denial or
suspension of Program participation prior
to the Program Participant exiting the
Program due to graduation or the expira-
tion of its Program Participation term.
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‘‘(ii) GROUNDS FOR TERMINATION.—
An action for termination shall be based
upon good cause as specified in implement-
ing regulation, and shall include—
‘‘(I) failure of the Program Par-
ticipant to maintain its eligibility for
Program participation;
‘‘(II) a demonstrated pattern of
failing to make required submissions
or responses to the Administration in
a timely manner; or
‘‘(III) willful violation of any rule
or regulation of the Administration
pertaining to material issues relating
to Program participation.
‘‘(iii) TERMINATION
PROCEEDING.—
Whenever the Administration determines
to initiate a termination proceeding, within
15 days after making such a determina-
tion, the Program Participant shall be pro-
vided a written notice of intent to termi-
nate, specifying the reasons for such ac-
tion. No Program Participant shall be ter-
minated without first being afforded an op-
portunity for a hearing on the record, in
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accordance with chapter 5 of title 5, Unit-
ed States Code.
‘‘(C) GRADUATION.—
‘‘(i) DEFINITION.—For the purposes
of this subsection, the term ‘graduation’
(or ‘graduated’) means that the Program
Participant is recognized as successfully
completing the Program by substantially
achieving the targets, objectives, and goals
contained in its business plan, or otherwise
demonstrating its ability to compete in the
marketplace.
‘‘(ii) 
GRADUATION
PROCEEDING.—
Whenever the Administration determines
to initiate a graduation proceeding with
which the Program Participant does not
concur, within 15 days after making such
determination, the Program Participant
shall be provided a written notice of the
Administration’s intent to involuntarily
graduate the concern, specifying the rea-
sons for such determination. No Program
Participant shall be involuntarily grad-
uated without first being offered an oppor-
tunity for a hearing on the record, in ac-
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cordance with chapter 5 of title 5, United
States Code.
‘‘(10) PROGRAM MANAGEMENT.—
‘‘(A) MANAGEMENT
INFORMATION
SYS-
TEM.—The Administrator shall develop and im-
plement a process for the systematic collection
of data on the operations of the Program, mon-
itoring regularly the effectiveness of the assist-
ance being provided to each Program Partici-
pant.
‘‘(B) ANNUAL REPORT TO CONGRESS.—
‘‘(i) REPORT
REQUIRED.—Not later
than April 30 of each year, the Adminis-
trator shall submit a report to the Con-
gress on the Program regarding the effec-
tiveness of the Program in fostering the
entrepreneurial development of Program
Participants.
‘‘(ii) CONTENTS OF THE REPORT.—In
addition to such performance measures as
the Administrator deems appropriate, the
report shall include the following—
‘‘(I) The average personal net
worth of individuals who own and con-
trol concerns that were initially cer-
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tified for participation in the Program
during the immediately preceding fis-
cal year.
‘‘(II) A compilation and evalua-
tion of those business concerns that
have exited the Program during the
immediately preceding three fiscal
years. Such compilation and evalua-
tion shall detail the number of con-
cerns actively engaged in business op-
erations, those that have ceased or
substantially curtailed such operations
(including the reasons for such ac-
tions), and those concerns that have
been acquired by other business con-
cerns or entities.
‘‘(III) A listing of all participants
in the Program during the preceding
fiscal year identifying, by State and
by Region, for each firm: the name of
the concern, the race or ethnicity, and
gender of the owners, gross receipts,
number of employees, the dollar value
of all contracts received in the preced-
ing year, the dollar amount of ad-
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vance payments received by each con-
cern, and a description including (if
appropriate) an estimate of the dollar
value of all other assistance furnished
under the Program during such year.
‘‘(C) The first report required by subpara-
graph (B) shall pertain to fiscal year 1997.
‘‘(11) PERSERVING PROGRAM INTEGRITY.—
‘‘(A) IN GENERAL.—No person within the
employ of the Administration shall, during the
term of such employment and for a period of
two years after such employment has been ter-
minated, engage in any activity or transaction
specified in subparagraph (B) with respect to
any Program Participant during such person’s
term of employment, if such person participated
personally (either directly or indirectly) in deci-
sionmaking responsibilities relating to such Pro-
gram Participant or with respect to the admin-
istration of any assistance provided to Program
Participants generally under this subsection.
‘‘(B) PROHIBITED
ACTIONS.—The activi-
ties and transactions prohibited by subpara-
graph (A) include—
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‘‘(i) the buying, selling, or receiving
(except by inheritance) of any legal or ben-
eficial ownership of stock or any other
ownership interest or the right to acquire
any such interest;
‘‘(ii) the entering into or execution of
any written or oral agreement (whether or
not legally enforceable) to purchase or oth-
erwise obtain any right or interest de-
scribed in clause (i); or
‘‘(iii) the receipt of any other benefit
or right that may be an incident of owner-
ship.
‘‘(D) PENALTIES.—Any present or former
employee of the Administration who violates
this paragraph shall be subject to a civil pen-
alty, assessed by the Attorney General, that
shall not exceed 300 percent of the maximum
amount of gain such employee realized or could
have realized as a result of engaging in those
activities and transactions prescribed by sub-
paragraph (B).’’
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SEC. 3. ELIMINATION OF 8(a) CONTRACTING AUTHORITY.
(a) REPEAL OF SECTION 8(A).—Section 8(a) of the
Small Business Act (15 U.S.C. 637(a)) is amended to read
as follows:
‘‘SEC. 8(a). [RESERVED].’’
(b) AUTHORITY TO PERFORM EXISTING 8(a) CON-
TRACTS.—Subject to the provisions of Section 8(a) of the
Small Business Act (15 U.S.C. 637(a)) as in effect on the
day before the date of enactment of this Act, a contract
(including options) awarded pursuant to that subsection
may be performed by the concern awarded such contract.
(c) DEFINITIONS.—Section 3 of the Small Business
Act (15 U.S.C. 632) is amended by adding the following
new subsections:
‘‘(o) For the purposes of this Act, the term ‘Indian
tribe’ means any band, nation, or other organized group
or community of Indians, including any Alaska Native vil-
lage or a regional or village corporation (within the mean-
ing of the Alaska Native Claims Settlement Act) which
is recognized as—
‘‘(1) eligible for the special programs and serv-
ices provided by the United States to Indians be-
cause of their status as Indians, or
‘‘(2) an Indian tribe by the State in which such
band, nation, group, or community resides.
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‘‘(p) For the purposes of this Act, the term ‘Native
Hawaiian Organization’ means any community service or-
ganization serving Native Hawaiians in the State of Ha-
waii, which—
‘‘(1) is a not-for-profit organization chartered
by the State of Hawaii,
‘‘(2) is controlled by Native Hawaiians, and
‘‘(3) whose business activities will principally
benefit Native Hawaiians.’’.
(d) STATUS PROTEST SYSTEM.—Section 8(d) of the
Small Business Act (15 U.S.C. 637(d)) is amended by
adding at the end thereof a new paragraph (11), as fol-
lows:
‘‘(11)(A) A protest may be brought regarding a
representation by a business concern regarding its
status as small business concern owned and con-
trolled by socially and economically disadvantaged
individuals by
‘‘(i) another person with a direct economic
interest in the award of the contract or sub-
contract under which such business has alleg-
edly made the false representation regarding its
status as a small business concern owned and
controlled by socially and economically dis-
advantaged individuals;
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‘‘(iii) include findings of fact and conclu-
sions of law, with specific reasons supporting
such findings and conclusions, on each material
issue of fact and law of decisional significance
regarding the disposition of the protest.
‘‘(D) A decision issued pursuant to subpara-
graph (B) shall be considered a final agency action,
and shall be subject to judicial review under section
553 of title 5, United States Code.
‘‘(E) If a firm engages in a pattern of misrepre-
sentations regarding the firm’s status in violation of
section 16(d)(1), the Administration or the executive
agency receiving such misrepresentations of status
shall initiate an action to impose an appropriate
sanction under section 16(d)(2).’’.
(4) SIZE DETERMINATIONS REGARDING TRIB-
ALLY-OWNED CORPORATIONS.—Section 3(a) of the
Small Business Act (15 U.S.C. 632(a)) is amended
by adding at the end the following new paragraph:
‘‘(4) In determining the size of a business con-
cern owned by an Indian tribe (or a wholly-owned
business entity of such tribe), each firm’s size shall
be independently determined without regard to its
affiliation with the tribe, any entity of the tribal gov-
ernment, or any other business enterprise owned by
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the tribe, unless the Administrator determines that
one or more such tribally-owned business concerns
have obtained (or are likely to obtain) a substantial
unfair competitive advantage within an industry cat-
egory.’’.
(5) POLITICALLY MOTIVATED ACTIONS PROHIB-
ITED.—Section 4 of the Small Business Act (15
U.S.C. 633) is amended by adding at the end the
following new subsection:
‘‘(g) POLITICALLY MOTIVATED ACTIONS PROHIB-
ITED.—
‘‘(1) IN GENERAL.—Any employee of the Ad-
ministration who has authority to take, direct others
to take, recommend, or approve any action with re-
spect to any program or activity conducted pursuant
to this Act, shall not, with respect to any such ac-
tion, exercise or threaten to exercise such authority
on the basis of the political activity or affiliation of
any party. Employees of the Administration shall ex-
peditiously report to the Inspector General of the
Administration any such action for which such em-
ployee’s participation has been solicited or directed.
‘‘(2) PENALTIES AUTHORIZED.—Any employee
who willfully and knowingly violates paragraph (1)
shall be subject to disciplinary action, which may
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consist of separation from service, reduction in
grade, suspension, or reprimand.
‘‘(3) RULE OF CONSTRUCTION.—Paragraph (1)
shall not apply to any action taken as a penalty or
other enforcement of a violation of any law, or regu-
lation prohibiting or restricting political activity.
‘‘(4) SAVINGS PROVISION.—The prohibitions of
paragraph (1), and remedial measures provided for
under paragraphs (2) and (3) with regard to such
prohibitions, shall be in addition to, and not in lieu
of, any other prohibitions, measures or liabilities
that may arise under any other provision of law.’’.
SEC. 4. PROCUREMENT FORECASTS.
Section 15(d) of the Small Business Act (15 U.S.C.
644(d)) is amended to read as follows:
‘‘(d)(1) Each executive agency reporting to the Fed-
eral Procurement Data System contract actions with an
aggregate value in excess of $50,000,000 in fiscal year
1995, or in any succeeding fiscal year, shall prepare a
forecast of expected contract opportunities or classes of
contract opportunities for the next and succeeding fiscal
years that small business concerns, including those owned
and controlled by women or socially and economically dis-
advantaged individuals, are capable of performing. Such
forecast shall be periodically revised during such year.
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‘‘(2) To the extent such information is available, the
agency forecasts required by paragraph (1) shall specify—
‘‘(A) The approximate number of individual
contract opportunities (and the number of opportu-
nities within a class).
‘‘(B) The approximate dollar value, or range of
dollar values, for each contract opportunity or class
of contract opportunities.
‘‘(C) The anticipated time (by fiscal year quar-
ter) for the issuance of a procurement request.
‘‘(D) The activity responsible for the award and
administration of the contract.
‘‘(3) The head of such executive agency subject to
the provisions of paragraph (1) shall, within 10 days of
its completion, furnish such forecast (and any modifica-
tion) to—
‘‘(A) the Director of the Office of Small and
Disadvantaged Business Utilization established pur-
suant to section 15(k) for such agency; and
‘‘(B) the Administrator.
‘‘(4) The information reported pursuant to paragraph
(1) may be limited to classes of items and services for
which there are substantial annual purchases.
‘‘(5) Such forecasts shall be made available to any
small business concerns upon request.’’.
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SEC. 5. NON-MANUFACTURER RULE.
Section 15(f) of the Small Business Act (15 U.S.C.
644(f)) is amended to read as follows:
‘‘(f)(1) An otherwise responsible small business con-
cern that is in compliance with the requirements of para-
graph (2) shall not be denied the opportunity to submit
and have considered its offer for any procurement contract
for the supply of a product to be let pursuant to subsection
(a) solely because such concern is other than the actual
manufacturer or processor of the product to be supplied
under the contract.
‘‘(2) To be in compliance with the requirements re-
ferred to in paragraph (1), such a business concern
shall—
‘‘(A) be primarily engaged in the wholesale or
retail trade;
‘‘(B) be a small business concern under the nu-
merical size standard for the Standard Industrial
Classification Code assigned to the contract solicita-
tion on which the offer is being made;
‘‘(C) be a regular dealer, as defined pursuant to
section 35(a) of title 41, United States Code (popu-
larly referred to as the Walsh-Healey Public Con-
tracts Act), in the product to be offered the Govern-
ment; and