Federal Contracting and Subcontracting with Small Businesses: Issues in the 112th Congress
Released: 2013-01-24T00:00:00

Summary:
Congress has generally broad authority to impose requirements upon the federal procurement process, or the process whereby agencies obtain goods and services from the private sector. One of the many ways in which Congress has exercised this authority is by enacting measures intended to promote contracting and subcontracting with "small businesses" by federal agencies. Among other things, these measures (1) declare a congressional policy of ensuring that a "fair proportion" of federal contract and subcontract dollars are awarded to small businesses; (2) establish government-wide and agency-specific goals for the percentage of contract and/or subcontract dollars awarded to small businesses; (3) require or authorize agencies to conduct competitions in which only small businesses may compete (i.e., set-asides), or make noncompetitive awards to them in circumstances when such awards could not be made to other businesses; and (4) task the Small Business Administration (SBA) and officers of the procuring agencies with reviewing and helping to restructure proposed procurements so as to maximize opportunities for small business participation. A companion report, CRS Report R42391, Legal Authorities Governing Federal Contracting and Subcontracting with Small Businesses, by [author name scrubbed] and [author name scrubbed], provides an overview of these statutes, the regulations implementing them, and the various judicial and other tribunals that construe them.
This report describes and analyzes measures that Members of the 112th Congress enacted or proposed in response to particular issues pertaining to small business contracting and subcontracting. The majority of such measures addressed (1) the standards under which firms' size is measured, including the establishment of size standards for "early stage" small businesses and "mid-sized" firms; (2) government-wide or agency-specific goals for contracting and subcontracting with small businesses; and (3) eligibility for the set-aside programs for particular types of small businesses (e.g., HUBZone small businesses). Other measures addressed federal contractors' obligations vis-à-vis small business subcontractors; limitations on the amount of work that may be subcontracted by small businesses to other firms; expedited payment of small business contractors; increases to the maximum surety bond amount that SBA may guarantee; bundling and consolidation of requirements into contracts unsuitable for award to small businesses; and agency "insourcing" of functions performed by small businesses. Yet other measures addressed the responsibilities of SBA Procurement Center Representatives and agency Offices of Small and Disadvantaged Business Utilization; the circumstances in which agencies may set aside contracts for small businesses or make non-competitive awards to them; the use of small businesses when making "small purchases;" mentor-protégé programs wherein large businesses provide financial and other assistance to small businesses; the deterrence and punishment of fraud in small business contracting programs; and contracting or subcontracting with small businesses by particular agencies.

subsections: section_title: Introduction
paragraphs: Congress has generally broad authority to impose requirements upon the federal procurement process, or the process whereby agencies obtain goods and services from the private sector. One of the many ways in which Congress has exercised this authority is by enacting measures intended to promote contracting and subcontracting with "small businesses" by federal agencies. Among other things, these measures (1) declare a congressional policy of ensuring that a "fair proportion" of federal contract and subcontract dollars are awarded to small businesses; (2) establish government-wide and agency-specific goals for the percentage of contract and/or subcontract dollars awarded to small businesses; (3) require or authorize agencies to conduct competitions in which only small businesses may compete (i.e., set-asides), or make noncompetitive awards to them in circumstances when such awards could not be made to other businesses; and (4) task the Small Business Administration (SBA) and officers of the procuring agencies with reviewing and helping to restructure proposed procurements so as to maximize opportunities for small business participation. A companion report, CRS Report R42391, Legal Authorities Governing Federal Contracting and Subcontracting with Small Businesses , by [author name scrubbed] and [author name scrubbed], provides an overview of these statutes, the regulations implementing them, and the various judicial and other tribunals that construe them. 
This report describes measures that Members of the 112 th Congress enacted or proposed in response to particular issues pertaining to small business contracting and subcontracting (e.g., increasing SBA's size standards, increasing government-wide or agency-specific goals for contracting and/or subcontracting with small businesses). In particular, it analyzes changes to existing law that were made, or that would have been made had certain measures been enacted, and discusses legal issues potentially raised by certain types of measures. Although a number of bills are included in this discussion, the report does not attempt to address all bills, nor does it address all provisions of any bills that are included. Rather, these bills are presented as examples of particular approaches to issues of interest to the Congress. In addition, this report's discussion of the legal questions potentially raised by various approaches to current issues (e.g., creation of additional set-aside programs) should not be construed to mean that any specific bill cited in the report would necessarily raise these questions. Much would depend upon the drafting and details of particular bills, the analysis of which is outside the scope of this report.
The report will not be updated. A separate report will address issues pertaining to small business contracting and subcontracting in the 113 th Congress. 
section_title: Size Standards
paragraphs: The Small Business Act currently gives the Administrator of Small Business considerable discretion as to what firms qualify as small for purposes of the act, or for certain other purposes of federal law. The act requires only that small businesses be "independently owned and operated," be "not dominant in their field of operations," and meet any size standards established by the Administrator. The Administrator first promulgated regulations specifying standards for size in various industries in 1956 under the authority of the Small Business Act of 1953, which established SBA on a temporary basis. 
Between the early 1980s and 2007, SBA conducted no comprehensive reviews of the size standards, instead making only intermittent changes to the standards for particular industries. Its failure to do so prompted some Members of Congress and commentators to question whether the standards adequately reflected recent trends in industry or government procurement. Partly in response to such concerns, the 111 th Congress enacted legislation that requires SBA to conduct a "detailed review" of at least one-third of the size standards every 18 months, and make "appropriate adjustments" to them to reflect market conditions. The legislation also includes certain provisions regarding "small business size and status integrity" intended to combat fraud in the small business programs that are discussed below. Following the enactment of this legislation, SBA completed its first "comprehensive" review of the size standards since the 1980s, and has promulgated or proposed regulations that could reportedly result in thousands of additional firms becoming eligible for small business programs. Some increases to the size standards took effect in March 2012; other increases are pending.
Concerns about the size standards and, in particular, SBA's discretion in crafting them persisted, however, notwithstanding the legislation enacted by the 111 th Congress and the changes made or proposed by SBA. Partly in response to these concerns, the 112 th Congress enacted legislation that requires SBA to consider and publicly address certain factors (e.g., the industry for which the new size standard is proposed, and its competitive environment) when conducting any rulemaking to "revise, modify or establish" size standards pursuant to Section 3 of the Small Business Act. This legislation also prohibits SBA from limiting the number of size standards, and from establishing or approving a single size standard for a grouping of 4-digit North American Industry Classification System (NAICS) codes unless SBA justifies that such a standard is appropriate for each industry classification included within the grouping. 
Members of the 112 th Congress also introduced legislation that would have required SBA to 
establish a new classification system to replace the current system based on North American Industrial Classification System (NAICS) codes; repeal the "nonmanufacturer rule," an SBA regulation that permits firms with fewer than 500 employees which supply the products of small businesses (or obtain a waiver from SBA) to qualify as small in certain procurements; and exclude firms that are publicly traded, or more than 50% directly or indirectly owned by "individuals" who are not U.S. citizens, from programs under the Small Business Act.
Other Members of the 112 th Congress proposed the creation of set-aside programs for firms that are very small and/or new, and for "mid-sized" firms. In both cases, the proposals reflected concerns that particular firms may be included in, or excluded from, existing small business programs because of the size standards. Proposals to create set-aside programs for mid-size firms responded to concerns that such firms are too big to qualify as "small" under the size standards, but too small to compete effectively with "large" government contractors. Conversely, proposals to create set-asides specifically for "early stage small businesses"—or particularly small and/or new businesses—addressed concerns that the current size standards can encompass firms of very different sizes, and that the smallest such firms may be unable to compete effectively against larger ones. 
Depending upon how eligibility for any new set-aside program is defined, certain programs could potentially have been vulnerable to challenge upon equal protection or other grounds. The current 8(a) Program, which incorporates a rebuttable presumption that members of certain racial and ethnic groups are disadvantaged, has been challenged on the grounds that it deprives individuals who are not members of these groups of equal protection of the law in violation of the U.S. Constitution. Programs that include a similar presumption, or otherwise define eligibility in a manner that could be found to constitute a de facto racial classification, could face similar challenges. 
section_title: Government-Wide and Agency-Specific Goals
paragraphs: Congress amended the Small Business Act in 1978 to require that agency heads, in consultation with the SBA, set goals for the percentage of federal contract and subcontract dollars awarded to small businesses each year. Congress further amended the act in 1988 to require the President to set government-wide goals for the percentage of federal contract and/or subcontract dollars awarded annually to various categories of small businesses. These goals must be equal to or exceed certain percentages specified in statute (i.e., 23% of federal contract dollars awarded to small businesses; 5% of federal contract and subcontract dollars awarded to women-owned small businesses; 5% to small disadvantaged businesses; 3% to HUBZone small businesses; and 3% to service-disabled veteran-owned small businesses). Agency performance in meeting the small business contracting and subcontracting goals is of perennial interest to Congress because it is arguably the clearest indicator of whether the stated congressional "policy" of encouraging contracting with small businesses is being implemented. In particular, commentators frequently note the government's failure to meet either government-wide or agency-specific goals, and some have suggested that the current government-wide goals are too low and do not adequately reflect the availability of minority-, women-, and service-disabled veteran-owned small businesses in today's marketplace. 
Partly in response to such concerns, the 111 th Congress enacted legislation requiring that senior procurement executives, senior program managers, and agency directors of Small and Disadvantaged Business Utilization communicate to their subordinates "the importance of achieving small business goals." The 112 th Congress enacted legislation which reiterates this requirement, as well as makes a number of other changes to Section 15(g) of the Small Business Act in the hopes of improving agencies' performance vis-à-vis their contracting and subcontracting goals. Among other things, this legislation directs SBA and the Administrator of Federal Procurement Policy to "insure" that agencies' annual prime contract goals "meet or exceed" the annual government-wide goal. It also requires that agencies separately address prime and subcontract awards for each category of small businesses (e.g., women-owned) in their goals, and make a "consistent effort to annually expand participation" by small businesses in each category. In addition, the legislation enacted by the 112 th Congress directs SBA to review its "Goaling Guidelines" to ensure that
agency subcontracting goals are established on the basis of "realistically achievable improvements" in levels of subcontracting, rather than on the basis of previous years' performance; agency goals are established in a manner that does not exclude certain categories of contracts based on the type of goods or services acquired; or, in the case of certain contracts subject to competitive procedures, based on whether the contract is subject to the Federal Acquisition Regulation (FAR), or funding is made directly available by an appropriation; and agencies document the basis for any decision to establish a goal that is lower than the government-wide goal for small businesses in that category. 
The legislation also calls for an independent assessment of the small business procurement goals; increases agency and SBA reporting regarding the small business goals; and requires that programs established for the training of senior executives under 5 U.S.C. §3396(a) address contracting requirements under the Small Business Act.
Some Members of the 112 th Congress also introduced legislation that would have increased the goals, or created greater incentives for agencies to meet their goals. The first category included bills that would have (1) increased the statutorily set government-wide goals; (2) required a specific agency to meet a goal; or (3) directed entities that may be exempt from the requirements of the Small Business Act to establish goals for contracting with small businesses. Some bills also addressed the related issue of how to count contracts for purposes of determining whether the goals have been met by expressly permitting certain contracts to be counted for goaling purposes; limiting to two the number of categories in which one business could be counted (e.g., HUBZone and women-owned); and specifying that certain types of businesses (e.g., foreign-owned) not be included in the count. 
The second category included bills that sought to improve the government's performance in meeting existing contracting and subcontracting goals. These types of measures tended to focus on increasing reporting by the agencies or SBA and publicizing the information, or requiring the Government Accountability Office (GAO) to study the activities of federal agencies and provide recommendations on how to improve goaling performance. Other provisions would have penalized agencies that failed to meet their goals. However, the latter type of provisions could potentially have raised constitutional issues to the degree that any penalties for failure to meet goals for contracting and subcontracting with minority- or women-owned small businesses, in particular, were seen as transforming these goals into quotas. To date, the courts have generally upheld aspirational goals that reflect classifications among small businesses based on the race or gender of their owners, among other factors, on the grounds that such goals are not mandatory and, thus, do not constitute disparate treatment of small business owners by the federal government. However, if legislation were to impose mandatory goals, or change the nature of the existing goals so that they were effectively mandatory, then questions could be raised as to whether the goal was essentially a quota that required minority- or women-owned small businesses to get fixed percentages of government contracts.
section_title: Eligibility for Existing Set-Aside Programs
paragraphs: Ever since Congress established the first set-aside program in 1978, the criteria governing eligibility for such programs have periodically been of interest to Members of Congress and the public. During the 112 th Congress, the primary concerns centered upon eligibility for the 8(a) and HUBZone programs, for various reasons discussed below. 
Proposals to create new set-aside programs for "early stage" small businesses or mid-sized firms are discussed above, under the heading " Size Standards ." Legislation to grant agencies additional authority to conduct competitions in which only women-owned small businesses may compete, or to make sole-source awards to them, are discussed below, under the heading " Restricted Competitions and Non-Competitive Awards ."
subsections: section_title: 8(a) Program
paragraphs: The Small Business Act requires SBA to establish a "small business and capital ownership development program" to provide non-financial assistance to certain small businesses owned and controlled by socially and economically disadvantaged individuals, and to enter into contracts with other government agencies that are subcontracted to such firms. Taken together, these requirements form the basis for SBA's 8(a) Program. In addition, the act defines socially disadvantaged individuals as "those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities," and economically disadvantaged individuals as
those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.
However, outside of limiting participation in the 8(a) Program by firms and individual owners to a maximum of nine years, and finding that members of certain groups are socially disadvantaged, the Small Business Act generally gives SBA considerable discretion as to the criteria for eligibility for the 8(a) Program. This is particularly true where economic disadvantage is concerned. The current net worth standards—which preclude individuals from having personal net worth of more than $250,000 at the time of entry into the 8(a) Program ($750,000 for continuing eligibility) —are established by regulation, not statute.
Recently, there has been particular concern about whether some persons who could benefit from the 8(a) Program are excluded from it due to the net worth standards, which were set in 1989 and have not been adjusted for inflation since then. Relatedly, some have expressed concern that firms are not adequately prepared to compete for federal or other contracts upon leaving the program, and that certain firms receive a disproportionately large share of all 8(a) contracts, leaving other firms with diminished opportunities to grow and develop. Partly in response to such concerns, the 111 th Congress enacted legislation requiring GAO to study whether the 8(a) mentor-protégé program and similar programs, discussed below, are "effectively supporting the goal of increasing the participation of small business concerns in Government contracting." 
Members of the 112 th Congress also introduced measures specifically addressing eligibility for the 8(a) Program, some seeking to expand eligibility, and others to restrict it, at least for certain owners and firms. The former category included measures that would have allowed firms to participate in the program for more than nine years and required SBA to provide technical assistance to those who are no longer eligible to participate, as well as measures that would have increased the net worth threshold. The second category—legislation intended to restrict the participation of certain populations in the 8(a) Program—included measures that would have subjected firms owned by Alaska Native Corporations (ANCs) to the same eligibility and other requirements to which individually owned 8(a) firms are subject. This legislation, which responded to the widely reported increase in federal contract dollars awarded to ANCs and their subsidiaries over the past decade, would have removed the alleged "special … advantages" that ANC-owned firms enjoy in contracting under Section 8(a) of the Small Business Act by
amending the Alaska Native Claims Settlement Act so that ANCs would no longer be deemed to be socially or economically disadvantaged for purposes of Sections 7(j) and 8(a) of the Small Business Act; redefining "Indian tribe" for purposes of the 8(a) Program to exclude ANCs; prohibiting ANC-owned firms from receiving additional sole-source awards when the total amount of competitive and sole-source awards they have received in any year exceeds the total amount of competitive and sole-source awards that individually owned firms may receive (approximately $100 million) ; prohibiting SBA from exempting ANC-owned firms from any time limitations on participation in the 8(a) Program to which individually owned 8(a) firms are subject; prohibiting ANCs from conferring eligibility to participate in the 8(a) Program on more than one firm at a time; and precluding ANC-owned 8(a) firms from acquiring ownership interests in other 8(a) firms that exceed the ownership interests that individually owned 8(a) firms may acquire. 
These changes would have effectively barred ANC-owned firms from receiving sole-source awards valued in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of Section 8(a) in circumstances when individually owned 8(a) firms cannot. They would also have resulted in all affiliations of ANC-owned firms being counted when the firms' size is determined. Were all affiliations counted, certain ANC-owned firms firms could be less likely to qualify as small and, thus, could potentially be excluded from the 8(a) Program. 
Other legislative proposals would have required disclosure of information about contracting with ANCs, either by imposing additional reporting obligations on ANCs, or by requiring SBA to include information regarding contracts with ANCs in certain reports to Congress.
section_title: HUBZone Program
paragraphs: Eligibility for the Historically Underutilized Business Zone (HUBZone) program has also been of interest to some Members of Congress and commentators recently because of reported fraud in the program, as well as the completion of the 2010 Census. A series of GAO reports, published between 2008 and 2010, found that the HUBZone program was vulnerable to fraud, prompting interest among some Members in measures which would ensure that only eligible firms participate in the program. Subsequently, the release of the results of the 2010 decennial census prompted similar interest among some Members in measures that would allow firms that lose their HUBZone status because of the 2010 census to continue participating in the HUBZone program for a limited time. For many firms, eligibility for the HUBZone program is based upon census results. The Small Business Act limits eligibility for the HUBZone program to firms whose principal office is located in a HUBZone and at least 35% of whose employees reside in a HUBZone, among other things. HUBZones include "qualified census tracts," as that term is defined in 26 U.S.C. Section 42(d)(5)(C)(ii), and qualified nonmetropolitan counties, or counties in which
(i) the median household income is less than 80 percent of the nonmetropolitan State median household income, based on the most recent data available from the Bureau of the Census of the Department of Commerce , (ii) the unemployment rate is not less than 140 percent of the average unemployment rate for the United States or for the State in which such county is located, whichever is less, based on the most recent data available from the Secretary of Labor, or (iii) there is located a difficult development area, as designated by the Secretary of Housing and Urban Development in accordance with section 42(d)(5)(C)(iii) of title 26, within Alaska, Hawaii, or any territory or possession of the United States outside the 48 contiguous States.
Also included are "redesignated areas," or areas that ceased to qualify as census tracts or nonmetropolitan counties, but were allowed to remain HUBZones until the later of (1) the date on which the Census Bureau publicly released the first results from the 2010 decennial census, or (2) three years after the date on which the census tract or nonmetropolitan county ceased to qualify. SBA has stated that, for purposes of the HUBZone program, the Census Bureau released the first results of the 2010 census on October 1, 2011.
The 112 th Congress enacted legislation that allows certain base closure areas to continue to be treated as HUBZones for an additional period. Specifically this legislation permits areas that were, on or before the date of the legislation's enactment, treated as HUBZones pursuant to Section 152(a)(2) of the Small Business Reauthorization and Manufacturing Assistance Act of 2004 to be treated as HUBZones for up to five years, provided that no area may be treated as a HUBZone for more than five years under the authority of this legislation and/or the 2004 act. Section 152(a)(2), in turn, provided for "base closure areas" that had undergone final closure to be treated as HUBZones for five years, and defined "base closure area" to include military installations closed pursuant to the Defense Base Closure and Realignment Act of 1990 and other authorities.
The 112 th Congress did not enact legislation that would address reported fraud in the HUBZone program, or the loss of HUBZone status by certain firms due to the 2010 census, although some Members introduced bills addressing these issues. Among the bills addressing reported fraud in the program were measures that would have required SBA to (1) ensure the HUBZone map is kept current; (2) implement policies to prevent unqualified businesses from participating in the program; (3) ensure timely processing of HUBZone applications; and (4) report to Congress on the efficacy of the program, or develop measures and implement plans to assess its effectiveness. Among the bills addressing the loss of eligibility due to the 2010 census were measures that would have extended the period during which redesignated areas continue to qualify until the later of three years after the date on which the SBA publishes a HUBZone map based on the 2010 census results, or three years after the date on which the area ceased to qualify. Other legislative proposals would have required the Secretary of Housing and Urban Development (HUD) to designate HUBZones based on the new census data within a specified time frame, or would have designated a particular county as a HUBZone for a specified time period. The latter types of provisions were particularly significant because, while SBA currently has considerable discretion in how it implements the HUBZone program (e.g., how often the HUBZone map is updated), it arguably does not have any discretion in which areas qualify as HUBZones. The Small Business Act defines "HUBZones" by reference to other categories (e.g., qualified census tracts) whose composition is determined by other agencies. 
Legislation was also introduced in the 112 th Congress that would have amended the definition of "HUBZone small business" given in Section 3 of the Small Business Act to include firms that are wholly owned by one or more Native Hawaiian Organizations, or partially owned by such an organization (or a corporation wholly owned by such an organization) if all other owners are U.S. citizens or small businesses. The proposed provisions paralleled those that presently address small businesses owned by Alaska Native Corporations, Indian tribal governments, and Community Development Corporations. Small businesses owned by these various types of entities have, at times, been subject to different treatment under the Small Business Act, and the proposed legislation was apparently intended to remove one such difference. 
section_title: Subcontracting Plans
paragraphs: The Small Business Act has long required agencies to take various steps to promote subcontracting with small businesses. Among other things, they have been required since 1978 to incorporate "subcontracting plans" in certain prime contracts, and to establish goals regarding the percentage of agency subcontract dollars awarded to small businesses. Nonetheless, despite these provisions, concerns about subcontracting have persisted, in part because the government has historically failed to meet its goals for the percentage of federal contract and subcontract dollars awarded to small businesses, and in part because of alleged mistreatment of small business subcontractors by agency prime contractors. In response to such concerns, the 111 th Congress amended Section 8(d) of the Small Business Act to require that agencies incorporate in their prime contracts terms obligating the contractor to (1) make a "good faith effort" to acquire goods and services (including construction work) from the small businesses whom it "used" in preparing and submitting the bid or proposal, "in the same amount and quantity used in preparing and submitting the bid or proposal;" and (2) notify the contracting officer in writing if it pays a reduced price to a subcontractor for completed work, or if payment to a subcontractor is more than 90 days past due for goods or services for which the government has paid the contractor.
Although SBA is still in the process of implementing the changes made by the 111 th Congress, the 112 th Congress enacted legislation which
requires agencies to collect and report data on the extent to which contractors meet the goals and objectives in their subcontracting plans, and periodically review the data to ensure that contractors are complying in good faith with plan requirements; 
provides that failure to comply in good faith with a subcontracting plan may be considered in any evaluation of contractors' past performance; 
requires that offerors who intend to identify a particular small business as a potential subcontractor notify that firm prior to doing so; 
requires that SBA establish a mechanism whereby subcontractors may report fraud or bad faith by a contractor with respect to a subcontracting plan; 
directs SBA to ensure that the electronic subcontracting reporting system ( http://www.esrs.gov/ ) is modified so that it can identify contractors who fail to submit required reports; and
requires annual reporting on the number of contractors who file subcontracting reports, as well as the number of contractors who exceed, meet, or fail to meet their goals for subcontracting with small businesses.
Some Members of the 112 th Congress also proposed legislation that would have (1) held prime contractors accountable for failure to report their subcontracting activities; (2) required withholding of a certain percentage of the contract price if the contractor fails to achieve certain goals in its subcontracting plan; and (3) required that contractors who fail to notify small businesses identified as potential subcontractors in their bids or proposals be fined a percentage of the contract price. Each of these proposals was arguably an expansion upon current law, which requires that contractors report on their performance in subcontracting semiannually during contract performance, but provides only that failure to make a "good faith effort" to comply with subcontracting-plan goals could subject the contractor to liquidated damages. However, if enacted, certain proposals could have raised issues of contract and/or constitutional law. Contract law generally permits parties to agree upon liquidated damages in cases where the injury caused by the breach is uncertain or difficult to quantify. The imposition of liquidated damages to "punish" a party for failure to perform under the contract, in contrast, is generally disfavored. Thus, if contract provisions calling for withholding or liquidated damages were viewed as punitive, as opposed to bona fide attempts to quantify the damages for breach, they might not be enforced. Similarly, fining contractors for failure to meet goals or notify subcontractors could potentially be found to violate the Eighth Amendment of the U.S. Constitution. The Eighth Amendment prohibits the imposition of excessive fines, and courts have found that "a punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense." Thus, assuming a fine were seen as punitive, it could potentially be found unconstitutional if it is disproportionate to the offense in light of the extent of the harm, the gravity of the offense, the nature and extent of the offense, and the availability of other penalties. Equal protection issues could also be raised if the penalties were so severe that the goals for subcontracting with minority- or women-owned small businesses, in particular, were seen as tantamount to quotas.
section_title: Limitations on Subcontracting
paragraphs: Congress originally imposed "limitations on subcontracting" upon 8(a) firms in 1986 in order to ensure that small businesses participating in the 8(a) Program developed capacity to perform as federal or other contractors. Because of these limitations, 8(a) firms were required to perform at least 50% of the cost of contracts for services (excluding construction) with their own personnel, and at least 50% of the cost (excluding materials) of contracts for goods. Similar requirements were imposed upon other contracts awarded under the authority of the Small Business Act in 1987, and also in 1987, SBA promulgated limitations on subcontracting for construction contracts, requiring firms to perform at least 15% of the cost (excluding materials) of general construction, and 25% of the cost (excluding materials) of construction by special trade contractors. These statutory and regulatory provisions remained unchanged between 1987 and 2012, although modifications were periodically suggested because of concerns about "pass through" contracts. 
Then, the 112 th Congress enacted legislation that restates how the limitations on subcontracting are expressed—in terms of the amount paid instead of the costs of performing —in the hopes of "ensur[ing] that small businesses that get contracts are doing the bulk of the work." Under this legislation, small businesses may subcontract no more than 50% of the "amount paid to [them] under the contract," in the case of contracts for services (other than construction) or supplies (other than from a regular dealer in such supplies). SBA is to establish similar limitations for general and special trade construction. The legislation also grants SBA the authority to modify any statutory limitations on subcontracting if it determines that "such change is necessary to reflect conventional industry practices" for small businesses, and to apply similar percentages to other contracts not awarded under the authority of the Small Business Act. In addition, the legislation provides that, if a contractor exceeds these limitations, it may be fined the greater of $500,000, or the amount expended, in excess of permitted levels, on subcontractors. The latter provision, in particular, could help address the recurring question, discussed below, of how to calculate the loss or damage to the government when a firm misrepresents its size or status for purposes of a federal contract or subcontract by providing an explicit measure of such loss or damage. However, potential constitutional issues could be raised if the fine were seen as punitive and the amount of the fine were seen as disproportionate to the offense. 
section_title: Payment
paragraphs: Because small businesses can be more vulnerable to changes in capital flow than large ones, payment of small businesses by federal agencies and prime contractors has long been of concern to Members of Congress and commentators. The Prompt Payment Act of 1982 requires that federal agencies pay interest on payments not made to contractors by the date specified in the contract, or within 30 days of receipt of a "proper invoice." Amendments made to the Prompt Payment Act in 1988 extended these protections to certain subcontractors by requiring agencies to include in their construction contracts terms obligating the contractor (1) to pay the subcontractor for "satisfactory performance" under the subcontract within seven days of receiving payment from the agency, and (2) to pay interest on any amounts that are not paid within the proper time frame. Like the original Prompt Payment Act, the 1988 amendments effectively protect small businesses even though the legislation does not specifically mention them. Small business subcontractors are especially prevalent in the construction industry.
Concerns about payment of small businesses generally, and of small business subcontractors in particular, were widespread during the recession of 2008-2009. Partly in response to such concerns, the 111 th Congress enacted legislation addressing the payment of small business subcontractors . This legislation requires that prime contractors notify the contracting officer whenever payment to a small business subcontractor is late or withheld, as well as authorizes the contracting officer to consider the contractor's failure to make full or timely payment to subcontractors when evaluating the contractor's performance. In addition, SBA is apparently considering requiring prime contractors who fail to meet their obligations in paying subcontractors to enter into "funds control agreements" with neutral third parties. The Obama Administration has also issued guidance addressing the payment of small business contractors and subcontractors. Initially, this guidance called for agencies to pay small business contractors within 15 days of receipt of a proper invoice. However, subsequent guidance sought to address payment of small business subcontractors by calling for agencies to "temporarily accelerate payments to all prime contractors, in order to allow them to provide prompt payments to small business subcontractors." In neither case are agencies required to pay interest on payments not made within the proposed time frames, unlike with "late" payments under the Prompt Payment Act. 
Legislation introduced in the 112 th Congress would have similarly directed agencies to pay small business contractors "as quickly as possible after invoices and all proper documentation, including acceptance, are received and before normal payment due dates established in the contract." However, like the Obama Administration's guidance, this measure contained no explicit sanctions for failure to pay in accordance with the policy (e.g., required interest payments). 
section_title: Surety Bonds
paragraphs: SBA administers a surety bond guarantee program, designed to encourage sureties to issue bonds when they would otherwise determine that a small business presents an unacceptable degree of risk. Historically, under the program, SBA could guarantee bid, performance, and payment bonds for individual contracts of $2 million or less for small businesses that cannot obtain surety bonds through regular commercial channels, with the guarantee ranging from 70% to 90% of the surety's loss if a default occurs. However, in response to the recession of 2007-2009, the 111 th Congress temporarily increased, from February 17, 2009, through September 30, 2010, the maximum bond amount from $2 million to $5 million, and allowed the amount to increase to $10 million if a federal contracting officer certified that the larger guarantee was "necessary." ARRA also temporarily modified the program's size standards so that a business would be eligible for the program if it (and its affiliates) did not exceed the size standard for the primary industry in which the business was engaged . This change allowed more businesses to qualify for the program, and SBA subsequently used its rulemaking authority to make this change permanent.
Concerns about the ability of small businesses to secure the surety bonds needed to compete for contracts persisted after the recession ended in 2009, however, and the 112 th Congress enacted legislation that permanently increases the maximum bond amount to $6.5 million ($10 million if the contracting officer certifies that the larger guarantee is "necessary"). This legislation also provides for the basic bond amount ($6.5 million) to be periodically adjusted for inflation, and essentially codifies the SBA regulation which made permanent the temporary size standard authorized by the 111 th Congress. 
section_title: Bundling and Consolidation
paragraphs: The way in which agencies structure their requirements can have significant implications for small businesses. When multiple requirements are grouped into a single contract, that contract may be difficult, or impossible, for small businesses to perform. For this reason, Congress has enacted progressively more stringent limitations upon the "bundling" and "consolidation" of requirements by federal agencies. First, in 1997, Congress amended the Small Business Act to define "bundling" as
consolidat[ing] 2 or more procurement requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small business concern due to—(A) the diversity, size, or specialized nature of the elements of performance specified; (B) the aggregate dollar value of the anticipated award; (C) the geographical dispersion of the contract performance sites; or (D) any combination of the factors described in subparagraphs (A), (B), and (C),
and to require agencies to take certain steps to ensure that any bundling which they engage in is "necessary and justified." Then, in 2003, Congress amended the Armed Services Procurement Act (ASPA) to prohibit defense agencies from executing any acquisition strategy that includes a "consolidation" of contract requirements valued in excess of $6 million without first (1) conducting market research, (2) identifying any alternative contracting approaches that would involve a lesser degree of consolidation of contract requirements, and (3) determining that the consolidation is necessary and justified. Later, in 2010, Congress imposed similar restrictions upon the "consolidation" of requirements valued in excess of $2 million by non-defense agencies. However, concerns that agencies' bundling or consolidation of contract requirements limits opportunities for small businesses to perform as federal contractors persisted despite these amendments to the Small Business Act, in large part because of how "bundling" and "consolidation" were defined in federal law. These definitions encompassed only requirements that were previously provided or performed under separate smaller contracts, and some federal agencies sought to defend challenged procurements by arguing that requirements for construction are, per se , new requirements. Some agencies also asserted that adding a new requirement to requirements previously performed means there is no bundling. 
The 112 th Congress enacted legislation that amended the definition of "consolidation of contract requirements" so that it includes contracts to "satisfy the requirements ... for construction projects to be performed at 2 or more discrete sites," as well as
2 or more requirements ... for goods or services that have been provided to or performed ... under 2 or more separate contracts lower in cost than the total cost of the contract for which the offers are solicited. 
This legislation also repeals the provisions on consolidation enacted in 2003, which applied only to defense agencies, although such agencies would generally be subject to the same requirements as civilian agencies under the 2010 act, as amended. In addition, the legislation requires GAO to review existing data on consolidation, including (1) the extent to which written determinations that consolidation is "necessary and justified" to meet legal requirements; (2) the amount of savings from consolidated contracts; (3) the extent to which consolidation is consistent with small business subcontracting plans; and (4) the adequacy of data collected pursuant to Section 15 of the Small Business Act regarding bundling.
Members of the 112 th Congress introduced legislation that would have similarly amended the definition of "bundling" to include construction, as well as specified that a 
combination of contract requirements that would meet the definition of a bundling of contract requirements but for the addition of a procurement requirement with at least 1 new good or service shall be considered to be a bundling of contract requirements unless the new features or functions substantially transform the goods or services and will provide measurably substantial benefits to the Federal Government in terms of quality, performance, or price. 
This legislation would also have authorized SBA to delay the issuance of a solicitation for up to 10 days to make recommendations whenever SBA and the procuring agency disagree as to the existence or extent of bundling. This time period is arguably shorter than that provided for under current law. However, the procuring agency, not SBA, presently determines whether any such delay occurs. Other legislation would have written into statute and arguably strengthened various responsibilities of Procurement Center Representatives (PCRs) and other small business advocates vis-à-vis bundled solicitations that are currently addressed primarily in regulations. For example, this legislation would have required procuring activities to provide a copy of the proposed procurement to the PCR at least 45 days prior to the issuance of a solicitation and explain, among other things, why construction cannot be procured as separate discrete projects. This legislation would also have authorized the Administrator of Small Business to file an appeal with the appropriate agency board of contract appeals (which generally hears disputes between agencies and contractors under existing contracts) whenever the Administrator and the agency fail to agree.
In addition, legislation was introduced that would address bundling of requirements by the Department of Homeland Security (DHS). Because of DHS's previous reliance upon "lead systems integrators," there have been particular concerns about its bundling of requirements, and legislation introduced in the 112 th Congress would have required GAO to include in its review of DHS's Secure Border Initiative a discussion of any bundling that limits the ability of small businesses to compete. Any such review could result in findings that could inform future legislation. 
section_title: Insourcing
paragraphs: Recent attempts by the Department of Defense, in particular, to save money by insourcing certain functions performed by contractors prompted strong reactions from some small businesses concerned about agency performance of functions they had previously performed, as well as the government's hiring of their employees. Several small business contractors filed suit challenging agency determinations to insource particular functions on the grounds that these determinations were contrary to agency guidelines and, thus, violated the Administrative Procedure Act (APA). At first, there was some uncertainty as to whether the U.S. Court of Federal Claims had jurisdiction over such suits under the Administrative Disputes Resolution Act (ADRA) of 1996, or whether the federal district courts had jurisdiction under the APA. While this question appears to have been resolved, with most courts finding that the Court of Federal Claims has exclusive jurisdiction over challenges to insourcing determinations, questions have recently arisen as to whether contractors who are "interested parties" for purposes of ADRA must also meet prudential standing requirements , as well as whether vendors whose contracts have expired have standing to challenge insourcing determinations. In addition, prior challenges to sourcing determinations have raised questions about whether particular guidelines for determining whether government personnel or contractor employees should perform certain functions are legally binding. Such questions could recur if and when courts resolve current questions about whether particular contractors have standing to challenge insourcing determinations. 
The Obama Administration responded to small businesses' concerns regarding insourcing, in part, by including certain protections for small businesses in its final policy letter on "inherently governmental functions." Specifically, the policy letter directs agencies to place a lower priority on reviewing certain work performed by small businesses, as well as give small businesses preference when determining who performs work that will remain in the private sector after related functions are insourced. The 112 th Congress also responded by enacting legislation that calls for the Office of Management and Budget (OMB) to establish "procedures and methodologies" for use by agencies in deciding whether to insource functions performed by small businesses, including procedures for (1) identifying which contracts are considered for conversion; (2) determining whether particular functions are inherently governmental or critical functions; and (3) comparing the costs of performance by contractor personnel with the costs of performance by government personnel. This legislation also requires agency Offices of Small and Disadvantaged Business Utilization (OSDBUs) to review and to advise on insourcing determinations, and SBA procurement center representatives (PCRs) to consult with OSDBUs and other agency personnel on insourcing determinations. However, it does not appear that PCRs or OSDBUs would have authority to delay or block an agency insourcing determination.
Other legislation introduced in the 112 th Congress would have amended 31 U.S.C. § 3551(1) to expressly provide that the term "protest" includes a written objection to the "conversion of a function that is being performed by a private sector entity to performance by a Federal employee," and that "any small business whose economic interest would be affected by the conversation" is an "interested party." The legislation would also have amended the Small Business Act by adding a new Section 46, which would have prohibited an agency from converting functions performed by small businesses to performance by federal employees unless it has "made publicly available, after providing notice and an opportunity for public comment," its procedures for making insourcing determinations. The requirement that agency procedures be made publicly available after a notice-and-comment period, in particular, could help remove questions as to whether agencies are bound by their insourcing guidelines that have arisen when these guidelines were promulgated as policy or guidance documents. However, questions about prudential standing could potentially remain, notwithstanding the enactment of this legislation, because prudential standing is a "judicially self-imposed limit[] on the exercise of federal jurisdiction."
section_title: Procurement Center Representatives; Offices of Small and Disadvantaged Business Utilization
paragraphs: A number of SBA and agency personnel currently are tasked, under various statutes and regulations, with protecting the interests of small businesses in the federal procurement process. Among these personnel are procurement center representatives (PCRs), who are assigned by the SBA to work with the procuring activities in structuring acquisitions so as to maximize the participation of small businesses, and Offices of Small and Disadvantaged Business Utilization (OSDBUs), which are established in the procuring activities to help devise alternatives to procurements involving "significant bundling," among other things. In part because of concerns about federal performance in contracting and subcontracting with small businesses, some Members of Congress and commentators have recently questioned the effectiveness of PCRs and/or OSDBUs, including whether these officials have the requisite authority and lines of reporting to adequately protect the interests of small businesses. In part because of these concerns, the 111 th Congress enacted legislation requiring the Administrator of Small Business to report periodically to Congress on the activities of PCRs and commercial market representatives (CMRs), who are tasked with facilitating contracting between agencies' prime contractors and small businesses. 
The 112 th Congress expanded upon these provisions by enacting legislation that addresses the training and experience of PCRs and OSDBUs, as well as their responsibilities. As to PCRs, this legislation generally requires PCRs to have a Level III Federal Acquisition Certification (or equivalent), and expressly provides that they are to (1) review barriers to small business contracting; (2) review bundled and consolidated contracts; (3) have access to procurement records and data; (4) receive unsolicited proposals; (5) consult regarding insourcing; and (6) advocate for the "maximum practicable utilization of small businesses." As to OSDBUs, this legislation requires that OBSBUs generally have experience relevant to federal contracting (e.g., program manager, contracting officer, attorney specializing in procurement), and expressly provides that OSDBUs are to (1) review and advise on insourcing determinations; (2) advise on acquisition strategies and market research; (3) provide training; and (4) receive unsolicited research proposals. This legislation also clarifies to whom OSDBU Directors must report, in response to recent findings by GAO that the OSDBU Directors of several federal agencies do not report to the agency head.
The legislation enacted by the 112 th Congress also requires the Federal Acquisition Institute (FAI) and Defense Acquisition University (DAU) to establish courses on small business contracting, which are to be required for Federal Acquisition Certification (or equivalent). In addition, it requires agency small business opportunity specialists to have Level I certification, and directs the Small Business Procurement Advisory Council, established pursuant to Section 7104(b) of the Federal Acquisition Streamlining Act, to conduct reviews of each OSDBU to determine compliance with reporting and other requirements, and to identify best practices for "maximizing small business utilization." 
section_title: Restricted Competitions and Non-Competitive Awards
paragraphs: Competition is generally valued in federal contracting because it can result in the government paying lower prices, ensure some level of transparency and accountability, and help prevent fraud. However, Congress has authorized agencies to use other than full-and-open competition in certain circumstances in order to promote other policy objectives, including contracting with small businesses. The Competition in Contracting Act (CICA) of 1984 currently provides that agencies may use "other than full and open competition" when making awards to small businesses. Such awards may be made on a set-aside or sole-source basis, pursuant to the Small Business Act. Congress amended the Small Business Act in 2010 to expressly authorize agencies to set-aside all or part of multiple-award contracts for small businesses, something which GAO had previously found was required in certain circumstances. 
The 112 th Congress enacted legislation that similarly expands agencies' authority to conduct competitions restricted to small businesses in the hopes of increasing the extent of contracting with such firms. Specifically, this legislation authorizes agencies to set aside contracts of any value for women-owned small businesses (WOSBs). Previously, only contracts whose value is below $4 million ($6.5 million for manufacturing contracts) could be set aside for such firms. This legislation also requires SBA to periodically identify industries in which WOSBs are underrepresented. Set-asides for WOSBs may only be used in industries where such firms are underrepresented or substantially underrepresented. 
Other legislation introduced in the 112 th Congress would have authorized agencies to "award a sole source contract under [Section 8(m) of the Small Business Act] to a small business concern owned and controlled by women under the same conditions as a sole source contract may be awarded to a qualified HUBZone small business concern under section 31(b)(2)(A)." The Small Business Act presently does not authorize sole-source awards to women-owned small businesses, although it does authorize such awards to HUBZone small businesses, among others, whenever
1. the business is determined to be responsible with respect to the performance of the contract, and the contracting officer does not reasonably expect that two or more such businesses will submit offers; 2. the anticipated award will not exceed $4 million ($6.5 million for manufacturing contracts); and 3. the award can be made at a fair and reasonable price.
Another measure introduced in the 112 th Congress would have amended the Veterans Benefits Act to require that VA make sole-source awards to veteran-owned small businesses whenever (1) the business is determined to be a responsible source with respect to the performance of the contract opportunity; (2) the anticipated award price of the contract (including options) exceeds the simplified acquisition threshold (generally $150,000 ) , but is less than $5 million; and (3) in the estimation of the contracting officer, the contract award can be made at a fair and reasonable price that offers best value to the United States). VA currently has authority to make sole-source awards when these circumstances exist, but is not required to do so. 
Yet other measures would have exempted contracts "authorized" under the Small Business Act from certain limitations imposed upon agency's use of noncompetitive procedures when entering contracts to procure property or services "in connection with natural disaster reconstruction efforts," as well as amended the Small Business Act to require, rather than just authorize, set-asides of or under multiple-award contracts. The latter measure would also generally have required agencies to conduct an outreach program designed to increase the participation of small businesses in multiple-award contracts, as well as required the President to establish annual goals for the "total dollar value of all task and delivery orders placed against multiple award contracts, blanket purchase agreements, and basic ordering agreements awarded to small business[es]."
section_title: Use of Small Businesses When Making "Small Purchases"
paragraphs: Federal law currently distinguishes between (1) purchases whose value is below the micro-purchase threshold (generally $3,000) ; (2) those whose value is above the micro-purchase threshold, but below the simplified acquisition threshold (generally $150,000) ; and (3) other purchases. Those acquisitions whose value falls between the micro-purchase threshold and the simplified acquisition threshold have long been "exclusively reserved" for small businesses, although agencies are also encouraged to use small businesses for purchases outside this range. The 111 th Congress enacted legislation intended to foster increased use of small businesses for micro-purchases by requiring the Office of Management and Budget (OMB), in consultation with the General Services Administration, to issue
guidelines regarding the analysis of purchase card expenditures to identify opportunities for achieving and accurately measuring fair participation of small business concerns in purchases in an amount not in excess of the micro-purchase threshold … and dissemination of best practices for participation of small business concerns in micro-purchases.
OMB issued this guidance on December 19, 2011, reminding agencies that those holding government-wide commercial purchase cards should consider small businesses "to the maximum extent practicable" when making micro-purchases. However, prior to the issuance of this guidance, one Member of the 112 th Congress introduced legislation that would have expanded the value of the "small purchases" in which small businesses could be preferred. Among other things, this legislation would generally have required agencies "to the extent practicable" to award contracts whose value exceeds $3,000, but is below $500,000, to small businesses. The legislation would also have given contracting officers additional authority to award contracts valued within this range to small businesses on a sole-source basis. Specifically, this legislation would have authorized agencies to make sole-source awards of contracts valued at between $150,000 and $500,000 to women-owned small businesses, or other small businesses that are not 8(a), HUBZone, or service-disabled veteran-owned small businesses. The Small Business Act currently does not authorize sole-source awards to such businesses. Rather, it only authorizes agencies to set aside contracts for them. 
section_title: Mentor-Protégé Programs
paragraphs: Mentor-protégé programs are intended to promote contracting and/or subcontracting with small businesses by pairing new businesses with more experienced businesses in mutually beneficial relationships. Congress established the first mentor-protégé program for small businesses in 1990, when it authorized the Department of Defense (DOD) Mentor-Protégé Pilot program. Eight years later, in 1998, SBA promulgated regulations establishing a mentor-protégé program for small disadvantaged businesses participating in the 8(a) Program. DOD's Mentor-Protégé Pilot Program differs from SBA's 8(a) Mentor-Protégé program in that it focuses upon promoting the use of small businesses as subcontractors and suppliers on federal contracts, and not upon use of small businesses as prime contractors. Specifically, under DOD's program, prime contractors may be reimbursed for advance payments made to small business subcontractors or suppliers, while under SBA's program, mentors and protégés may form joint ventures that qualify as small for purposes of certain federal prime contracts. More recently, a number of other agencies have implemented their own mentor-protégé programs, by regulation or otherwise. These programs differ, among themselves and as compared to the DOD and SBA programs, in their eligibility requirements and the types of assistance that mentors provide to protégés. Such differences have raised concerns among some Members of Congress and commentators that the programs lack "parity," are duplicative, and/or are confusing for small businesses. 
The 111 th Congress responded to the concerns about parity by enacting legislation that authorizes SBA to establish mentor-protégé programs for HUBZone, women-owned, and service-disabled veteran-owned small businesses modeled on its 8(a) mentor-protégé program. However, partly in response to the concerns about duplication, this legislation also directs GAO to study existing mentor-protégé programs and "other relationships and strategic alliances" pairing larger and small businesses to determine whether they are "effectively supporting the goal of increasing the participation of small business concerns in Government contracting." 
The 112 th Congress also enacted legislation addressing similar concerns. This legislation authorizes SBA to establish a mentor-protégé program open to all small businesses. By comparison, the legislation enacted by the 111 th Congress addressed only HUBZone, women-owned, and service-disabled veteran-owned small businesses. The legislation enacted by the 112 th Congress also prohibits federal agencies, with certain exceptions, from carrying out a mentor-protégé program for small businesses unless the plan for this program has been submitted to and approved by SBA. Depending upon its implementation, this provision could help ensure that there are not significant disparities among the various agency programs, and that these programs do not unnecessarily duplicate one another.
section_title: Deterrence of and Penalties for Fraud
paragraphs: Fraud in small business contracting programs has been a perennial concern for Congress and commentators because the advantages that firms can obtain by misrepresenting their size and status are apparently so great that reports of fraud emerge with some regularity. Firms that fraudulently misrepresent their size or status have long been subject to civil and/or criminal penalties under Section 16 of the Small Business Act; SBA regulations implementing Section 16; and other provisions of law, such as the False Claims Act, Fraud and False Statements Act, Program Fraud Civil Remedies Act, and Contract Disputes Act. In addition, various entities, including contracting officers, SBA officials, and certain other firms, have been authorized to "protest" firms' size or status with the SBA's Office of Hearings and Appeals. However, recent, high-profile reports of fraud in the small business programs have heightened concerns about whether the existing penalties and/or protest provisions are adequate to deter fraud and ensure that ineligible firms do not take improper advantage of small business contracting and subcontracting programs. 
Partly in response to concerns about fraud in the small business contracting programs, the 111 th Congress enacted legislation which provides that ineligible small businesses may not receive an "offset" or "credit" for the value of the goods or services they supplied to the government when the amount of "loss to the United States" is calculated for purposes of the civil False Claims Act or the U.S. Sentencing Guidelines, among other purposes. This legislation also provides that when a company (1) submits a bid or offer for a contract or subcontract set aside for, or otherwise classified as intended for, award to small businesses; (2) encourages the government to award it a contract based on its size or status; or (3) registers in any federal database for purposes of being considered for a federal contract or subcontract, it shall be deemed to have "affirmatively, willfully, and intentionally" certified its size and status. In addition, the legislation requires the development of a government-wide policy on the prosecution of size and status fraud, and that each business certified as small annually re-certify its size in the Online Representations and Certifications (ORCA) database, or any successor database.
The 112 th Congress similarly enacted legislation which subjects persons who misrepresent their size or status to debarment or suspension under the procedures of the Federal Acquisition Regulation (FAR) on this ground (instead of on the ground that the misrepresentation indicates a lack of business integrity that seriously and directly affects their present responsibility, as had previously been the case). This legislation also requires SBA to report annually to Congress on the number of persons debarred or suspended from government contracting, or considered for debarment or suspension from government contracting, for violations of the act. Other legislation enacted by the 112 th Congress amended the Veterans Benefits Act to require that firms be debarred for five years if they misrepresent their status as veteran-owned for purposes of programs under the act. The latter provisions, in particular, arguably depart significantly from previous law, which granted VA broad discretion as to the duration of any debarment. The Veterans Benefits Act had previously stated that firms which misrepresent their size or status "shall" be debarred for a "reasonable period of time, as determined by the Secretary" of Veterans Affairs. However, the act did not specify the period of debarment for such misrepresentations.
Other legislation introduced in the 112 th Congress would have addressed fraud in small business contracting programs in various ways, including by
amending Title 18 of the United States Code to provide that persons who knowingly make certain misrepresentations regarding their small business status in order to obtain, retain, or complete a federal contract are subject to imprisonment for up to five years and/or a fine of $1 million, or an amount equal to twice the value of the goods or services involved, whichever is greater; amending Section 16 of the Small Business Act to expressly include service-disabled veteran-owned small businesses among the types of small businesses subject to penalties for fraud under Section 16; requiring that service-disabled veteran-owned small businesses register in the Department of Veterans Affairs' (VA's) VetBiz database, or any successor database, and have their status verified by VA in order to be eligible for contracting preferences for service-disabled veteran-owned small businesses under the Small Business Act; requiring GAO to report periodically to Congress on the effectiveness of the 8(a) Program, including the percentage of businesses that continue to operate during the three-year period after successfully completing the program; requiring that "contracting rules and regulations" be amended to ensure that businesses are debarred from government contracting for no less than five years if they fraudulently represent that they are small as part of a bid or proposal for a small business contract awarded under the Small Business Act or other authority; authorizing "any person" to file a "complaint" with the SBA and/or the procuring agency regarding firms' status, and requiring that complaints be resolved in a timely manner; and requiring the Contractor Central Registration (CCR), or any successor database, include "adequate warning" of the criminal penalties under Section 16(d) of the Small Business Act for misrepresenting firm size or status.
Requiring service-disabled veteran-owned small businesses to register in the VetBiz database for contracts awarded under the authority of the Small Business Act (as opposed to the Veterans Benefits Act) would also have been a departure from current law, which permits such firms to self-certify their status. However, the effectiveness of any such change could depend upon how it is implemented by SBA and VA. 
section_title: Agency-Specific Programs
paragraphs: Members of the 112 th Congress have also enacted or proposed several measures addressing contracting and subcontracting with small businesses by particular agencies. Among the measures enacted was one appropriating $15 million to the Department of Defense (DOD) for use in making "incentive payments" under Section 504 of the Indian Financing Act (IFA) of 1974 to contractors or subcontractors that use certain Indian-owned small businesses as subcontractors or suppliers. The FAR authorizes agencies to pay similar "monetary incentives" to prime contractors that subcontract with small disadvantaged businesses. However, Congress has historically not appropriated funds specifically for the payment of such incentives, unlike with incentive payments made by DOD under the IFA. The 112 th Congress has also enacted legislation extending the Comprehensive Small Business Subcontracting Program for three years. This temporary program was established in 1989 to determine if comprehensive subcontracting plans on a corporate, division, or plant-wide basis (as opposed to a per-contract basis) would lead to increased opportunities for small businesses. In addition, the 112 th Congress enacted legislation that seeks to improve DOD's performance in contracting and subcontracting with small businesses by (1) requiring that officials within the Defense Contract Audit Agency (DCAA) and Defense Contract Management Agency (DCMA) be designated as "Small Business Ombudsmen" and tasked with monitoring the timeliness of audit closeouts for small businesses, among other things; and (2) requiring an independent assessment of DOD's performance in contracting with small businesses, including the quality and reliability of data on small business contracting and subcontracting by the Department and the degree to which DOD bundles, consolidates, or otherwise groups requirements into contracts that are unsuitable for award to small businesses. 
In addition, Members of the 112 th Congress introduced legislation that would have directed the Department of Homeland Security's (DHS's) Under Secretary for Management to "ensure" that DHS's website includes information on programs, policies, and initiatives designed to encourage small businesses to participate in agency acquisitions. Members also introduced legislation that would have
required that certain contracts and subcontracts which are financed with federal funds, but to which the federal government is not a party, "comply with provisions for small business assistance and protection that would have been applicable to the contract had the [government] been a party to the contract"; established a preference for "local contractors"—or contractors that have their principal offices or locations within a 60-mile radius of the facility covered by the contract—in the award of contracts to veteran-owned small businesses under the Veterans Benefits, Health Care, and Information Technology Act; allowed surviving spouses or dependants who acquire the ownership rights of a member of the Armed Forces who owned at least 51% of a small business and was killed in the line of duty to be treated as if they were veterans with service-connected disabilities for purposes of contracting goals and preferences under the Veterans Benefits, Health Care, and Information Technology Act; prohibited DOD from outsourcing certain functions until it assesses whether DOD has carried out "sufficient outreach programs" to assist women-and minority-owned small businesses located in the geographic area "near" the military base where the function is performed; made small businesses 100%, but conditionally, owned by veterans eligible for contracting preferences under the Veterans Benefits Act; and required the General Services Administration to "adhere to the requirements of the Small Business Act" when using commercial leasing services.
Yet other measures, addressing specific aspects of contracting or subcontracting with small businesses (e.g., goals), were discussed earlier in this report as examples of possible approaches to these issues (i.e., the enactment of agency-specific legislation).