II 117th CONGRESS 1st Session S. 2402 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. 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.