A bill to establish a pilot program to incentivize employee ownership in defense contracting.
Bill: S.2402 | Sponsor: Sen. Warren, Elizabeth (D-MA)
Policy area: Armed Forces and National Security

Summary:
This bill authorizes a three-year pilot program under which the Department of Defense may use noncompetitive procedures for awarding follow-on contracts to qualified businesses wholly-owned through an ESOP (i.e., an S corporation for which 100% of the outstanding stock is held through an employee stock ownership plan) if the prior contract was rated as satisfactory or better. The Government Accountability Office must report on the individual and aggregate uses of the authority provided under this bill.

To establish a pilot program to incentivize employee ownership in 
                          defense contracting.

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

SECTION 1. PILOT PROGRAM TO INCENTIVIZE EMPLOYEE OWNERSHIP IN DEFENSE 
              CONTRACTING.

    (a) Definitions.--In this section:
            (1) Appropriate committees of congress.--The term 
        ``appropriate committees of Congress'' means--
                    (A) the Committee on Armed Services and the 
                Committee on Homeland Security and Governmental Affairs 
                of the Senate; and
                    (B) the Committee on Armed Services and the 
                Committee on Oversight and Government Reform of the 
                House of Representatives.
            (2) Qualified business wholly-owned through an esop.--The 
        term ``qualified businesses wholly-owned through an ESOP'' 
        means an S corporation (as defined in section 1361(a)(1) of the 
        Internal Revenue Code of 1986) for which 100 percent of the 
        outstanding stock is held through an employee stock ownership 
        plan (as defined in section 4975(e)(7) of the Internal Revenue 
        Code).
    (b) Authority To Use Noncompetitive Procedures for Follow-On 
Contracts to Qualified Businesses Wholly-Owned Through an ESOP.--
Notwithstanding the requirements of section 2304 of title 10, United 
States Code, in the case of a follow-on contract for the continued 
development, production, or provision of products or services that are 
the same as or substantially similar to the products or services 
procured by the Department of Defense under a prior contract held by a 
qualified business wholly-owned through an ESOP, such products or 
services may be deemed to be available only from the holder of the 
prior contract and may be procured by the Department of Defense through 
procedures other than competitive procedures if the performance of the 
qualified business wholly-owned through an ESOP on the prior contract 
was rated as satisfactory (or the equivalent) or better in the 
applicable past performance database.
    (c) Verification and Reporting of Qualified Businesses Wholly-Owned 
Through an ESOP.--The Secretary of Defense shall prescribe such 
procedures as may be necessary for--
            (1) businesses to verify that they are qualified businesses 
        wholly-owned through an ESOP for the purposes of subsection 
        (b);
            (2) a qualified businesses wholly-owned through an ESOP to 
        certify that not more than 25 percent of the amount paid under 
        the contract will be expended on subcontracts, subject to such 
        necessary and reasonable waivers as the Secretary may 
        prescribe; and
            (3) recording information on each use of the authority 
        under subsection (b), including details relevant to the nature 
        of the contract and the qualified business wholly-owned through 
        an ESOP, and providing such information to the Comptroller 
        General of the United States.
    (d) Sunset.--The authority under subsection (b) shall expire on the 
date that is three years after the date of the enactment of this Act.
    (e) Comptroller General of the United States Report.--
            (1) In general.--Not later than two years after the date of 
        the enactment of this Act, the Comptroller General of the 
        United States shall submit to the appropriate committees of 
        Congress a report on the individual and aggregate uses of the 
        authority under subsection (b), using such data as may be 
        available up to that time.
            (2) Elements.--The report under paragraph (1) shall include 
        the following elements:
                    (A) An assessment of the frequency and nature of 
                the use of the authority under subsection (b).
                    (B) The tendency of businesses to become qualified 
                businesses wholly-owned through an ESOP in order to 
                qualify for the authority under subsection (b).
                    (C) Acquisition authorities that could incentivize 
                businesses to become qualified businesses wholly-owned 
                through an ESOP, including the extension of the 
                authority under subsection (b).
                    (D) Any related matters the Comptroller General 
                considers appropriate.
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