A bill to amend the Small Business Act and the Small Business Investment Act of 1958.
PL 95-507 (H.R.11318), enacted 10/24/1978

PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1757 
Public Law 95-507 
95th Congress 
An Act 
To amend the Small Business Act and the Small Business Investment Act of 1958. 
Oct. 24, 1978 
Be it enacted hy the Senate and House of Represenfatwes of the 
United States of America in Congress assembled^ 
TITLE I—AMENDMENTS TO THE SMALL BUSINESS 
INVESTMENT ACT OF 1958 
CHAPTER 1 
[H.R. 11318] 
Small Business 
Act and Small 
Business 
Investment Act of 
1958, 
amendment. 
Purchase and 
guarantee 
operations. 
15 u s e 683. 
SEC. 101. Section 303(c) (1) of the Small Business Investment Act 
of 1958 is amended to read as follows: 
"(1) shares of nonvoting stock (or other corporate securities 
having similar characteristics), provided— 
"(i) dividends are preferred and cumulative to the extent 
of 3 per centum of par value per annum; 
"(ii) on liquidation of redemption the Administration is 
entitled to the preferred payment of the par value of such 
securities; and prior to any distribution (other than to the 
Administration) the Administration shall be paid any 
amounts as may be due pursuant to subparagraph (i) of this 
paragraph; 
"(iii) the purchase price shall be at par value and, in any 
one sale, $50,000 or more; and 
"(iv) the amount of such securities purchased and out-
standing at any one time shall not exceed— 
"(A) from a company licensed on or before Octo-
ber 13, 1971, 200 per centum of the combined private 
\ 
paid-in capital and paid-in surplus of such company, or 
'' 
"(B) from any such company licensed after Octo-
ber 13, 1971, and having a combined paid-in capital and 
paid-in surplus of less than $500,000, 100 per centum of 
such capital and surplus, or 
"(C) from any such company licensed after Octo-
ber 13, 1971, and having a combined private paid-in 
capital and paid-in surplus of $500,000 or more, 200 per 
centum of such capital and surplus. 
"The amount of such securities purchased by the Administration 
in excess of 100 per centum of such capital and surplus from any 
company described in clause (A) or (C) may not exceed an 
amount equal to the amount of its funds invested in or legally 
committed to be invested in equity securities. For the purposes of 
the subsection, the term 'equity securities' means stock of any 
class (including preferred stock) or limited partnership interests, 
or shares in a syndicate, business trust, joint stock company or 
association, mutual corporation, cooperative or other joint ven-
tures for profit, or unsecured debt instruments which are 
subordinated by their terms to all other borrowings of the issuer.". 
SEC. 102. The last sentence of section 308(b) of the Small Business 
Investment Act of 1958 is amended to read as follows: "Such com- 15 U
S
C 687 
"Equity 
securities." 
92 STAT. 1758 
PUBLIC LAW 95-507—OCT. 24, 1978 
Repeal. 
15 use 687i. 
15 use 681. 
Capital 
requirements for 
small business 
investment 
companies. 
15 use 682. 
15 use 694a. 
Surety bond 
guarantees. 
15 use 694b. 
panies are authorized to invest funds not reasonably needed for their 
operations in direct obligations of, or obligations ^aranteed as to 
principal and interest by, the United States, or in certificates of deposit 
maturing within one year or less, issued by any institution the accounts 
of which are insured by the Federal Deposit Insurance Corporation or 
the Federal Savings and Loan Insurance Corporation, or in savings 
accounts of such institutions.". 
SEC. 103. The last sentence of section 317 of the Small Business 
Investment Act of 1958 is repealed. 
SEC. 104. Section 301(d) of the Small Business Investment Act of 
1958 is amended by inserting "or formed as a limited partnership," 
immediately after "statutes,". 
SEC. 105. Section 302(a) of the Small Business Investment Act of 
1958 is amended to read as follows: 
"SEC. 302(a). The combined private paid-in capital and paid-in 
surplus of any company licensed pursuant to sections 301(c) and (d) 
of this Act shall not be less than $150,000: Provided^ however, That the 
combined private paid-in capital and paid-in surplus of any company 
licensed on or after October 1, 1979 pursuant to sections 301(c) and 
(d) of this Act shall be not less than $500,000. In all cases, such capital 
and surplus shall be adequate to assure a reasonable prospect that the 
company will be operated soundly and profitably, and managed 
actively and prudently in accordance with its articles.". 
CHAPTER 2 
SEC. 110. Section 410(4) of the Small Business Investment Act of 
1958 is amended by— 
(1) deleting the word "or" after the phrase "conditions of the 
contract,"; and 
(2) deleting the period after the phrase "fails to make prompt 
payment" and inserting in lieu thereof ", or (D) is an agent, inde-
pendent agent, underwriter, or any other company or individual 
empowered to act on behalf of such person.". 
SEC. 111. Section 411 of the Small Business Investment Act of 1968 
is amended to read as follows: 
"SEC. 411. (a) The Administration may, upon such terms and con-
ditions as it may prescribe, guarantee and enter into commitments to 
guarantee any surety (the terms and conditions of said guarantees and 
commitments may vary from surety to surety on the basis of the 
Administration's experience with the particular surety) against loss, 
as hereinafter provided, as the result of a breach of the terms of a 
bid bond, payment bond, performance bond, or bonds ancillary and 
coterminous therewith, by a principal on any contract up to $1,000,000, 
subject to the following conditions: 
"(1) the person who would be the principal of the bond is a 
small business concern; 
"(2) the bond is required in order for such person to bid on a 
contract, or to serve as a prime contractor or subcontractor 
thereon; 
"(3) such person is not able to obtain such bond on reasonable 
terms and conditions without a guarantee under this section ; 
" (4) the Administration determines that there is a reasonable 
expectation that such person will perform the covenants and con-
ditions of the contract with respect to which the bond is required ; 
" (5) the contract meets requirements established by the Admin-
istration for feasibility of successful completion and reasonable-
ness of cost; and 
PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1759 
"(6) the terms and conditions of any bond guaranteed under 
the authority of this part are reasonable in light of the risks 
involved and the extent of the surety's participation. 
" (b) Subject to the provisions of this section, in connection with the 
issuance by the Administration of a guarantee to a surety as provided 
by subsection (a), the Administration may agree to indemnify such 
^
"
^ 
surety against a loss sustained by such surety in avoiding or attempting 
to avoid a breach of the terms of a bond guaranteed by the Administra-
tion pursuant to subsection (a) : Provided^ however— 
"(1) prior to making any payment under this subsection, the 
Administration shall first determine that a breach of the terms of 
such bond was imminent; 
"(2) no payment by the Administration pursuant to this sub- Limitation, 
section shall exceed 10 per centum of the contract price unless the 
Administrator determines that a greater payment should be made 
as a result of a finding by the Administrator that the surety's loss 
sustained in avoiding or attempting to avoid such breach was 
necessary and reasonable; and 
" (3) no new agreements to indemnify shall be entered into pur-
suant to this subsection subsequent to two years after the date of 
its enactment. 
"(c) Any guarantee or agreement to indemnify under this section Limitation, 
shall obligate the Administration to pay to the surety a sum not to 
exceed (1) in the case of a breach of contract, 90 per centum of the loss 
incurred and paid by the surety to or on behalf of the obligee, or to 
labor and materialmen, in fulfilling the terms of the contract as the 
result of the breach; or (2) in a case to which subsection (b) applies, 
the amount determined under subsection (b). 
"(d) The Administration may establish and periodically review Regulations, 
regulations for participating sureties which shall require such sureties 
to meet Administration standards for underwriting, claim practices, 
and loss ratios. 
"(e) Pursuant to any such guarantee or agreement, the Adminis-
tration shall reimburse the surety, as provided in subsection (c) of this 
section, except that the Administration shall be relieved of all liability 
"(1) the surety obtained such guarantee or agreement, or 
applied for such reimbursement, by fraud or material misrep-
resentation, or 
"(2) the total contract amount at the time of execution of the 
bond or bonds exceeds $1,000,000. 
"(f) The Administration may, upon such terms and conditions as 
it may presciibe,, adopt a procedure for reimbursing a surety for its 
paid losses billed each month, based upon prior monthly payments to 
such surety, with subsequent adjustments after such disbursement. 
"(g) The Administration may at all reasonable times audit in the Audit, 
offices of a participating surety all documents, files, books, records, and 
other material relevant to the Administration's guarantee, commit- 
% , y 
ments to guarantee, or agreements to indemnify any surety pursuant 
to this section. 
"(h) The Administration shall administer this Part on a prudent Administration, 
and economically justifiable basis and establish such fee or fees for 
small business concerns and premium or premiums for sureties as it 
'' 
deems reasonable and necessary, to be payable at such time and under 
such conditions as may be determined by the Administration. 
"(i) The provisions of section 402 shall apply in the administration 15 USC 693. 
of this section.". 
92 STAT. 1760 
PUBLIC LAW 95-507—OCT. 24, 1978 
Community 
SEC. 112. Section 602 of the Small Business Investment Act of 1958 
injection funds. 
is amended by adding at the end of paragraph (4) the following new 
15 use 696. 
sentence: "Community injection funds may be derived, in whole or 
in part, from— 
"(A) State or local governments; 
"(B) banks or other financial institutions; 
"(C) foundations or other not-for-profit institutions; or 
"^D) a small business concern (or its owners, stockholders, or 
affiliates) receiving assistance through bodies authorized under 
this title.". 
TITLE II—AMENDMENTS TO THE SMALL 
BUSINESS 
ACT 
CHAPTER 1 
15 use 631. 
SEC. 201. Section 2 of the Small Business Act is amended by adding 
at the end thereof the following new subsection: 
"(e) (1) with respect to the Administration's business development 
programs the Congress finds— 
"(A) that the opportunity for full participation in our free 
enterprise system by socially and economically disadvantaged 
persons is essential if we are to obtain social and economic equal-
ity for such persons and improve the functioning of our national 
economy; 
"(B) that many such persons are socially disadvantaged 
because of their identification as members of certain groups that 
have suffered the effects of discriminatory practices or similar 
invidious circumstances over which they have no control; 
"(C) that such groups include, but are not limited to, Black 
Americans, Hispanic Americans, Native Americans, and other 
minorities; 
"(D) that it is in the national interest to expeditiously amelio-
rate the conditions of socially and economically disadvantaged 
groups; 
"(E) that such conditions can be improved by providing the 
maximum practicable opportunity for the development of small 
business concerns owned by members of socially and economically 
' 
disadvantaged groups; 
"(F) that such development can be materially advanced through 
the procurement by the United States of articles, equipment, sup-
plies, services, materials, and construction work from such 
concerns; and 
"(G) that such procurements also benefit the U^nited States by 
encouraging the expansion of suppliers for such procurements, 
thereby encouraging competition among such suppliers and pro-
moting economy in such procurements. 
Post, p. 1761. 
" (2) It is, therefore, the purpose of section 8 (a) to— 
"(A) foster business ownership by individuals who are both 
socially and economically disadvantaged; 
• ' 
"(B) promote the competitive viability of such firms by provid-
ing such available contract, financial, technical, and management 
assistance as may be necessary; and 
"(C) clarify and expand the program for the procurement by 
the United States of articles, equipment, supplies, services, 
' • 
materials, and construction work from small business concerns 
' PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1761 
owned by socially and economically disadvantaged individuals.". 
SEC. 202. (a) Section 8(a) of the Small Business Act (15 U.S.C. Procurement 
637(a)) is amended to read as follows: 
contracts. 
"SEC. 8. (a) (1) It shall be the duty of the Administration and it is 
hereby empowered, whenever it determines such action is necessary or 
appropriate— 
" (A) to enter into contracts with the United States Government 
and any department, agency, or officer thereof having procurement 
powers obligating the Administration to furnish articles, equip-
ment, supplies, services, or materials to the Government or to per-
form construction work for the Government. In any case in which 
the Administration certifies to any officer of the Government hav-
ing procurement powers that the Administration is competent 
and responsible to perform any specific Government procurement 
contract to be let by any such officer, such officer shall be authorized 
in his discretion to let such procurement contract to the Adminis-
tration upon such terms and conditions as may be agreed upon 
between the Administration and the procurement officer. When-
ever the Administration and such procurement officer fail to agree, 
the matter shall be submitted for determination to the Secretary 
or the head of the appropriate department or agency by the 
Administrator; 
"(B) to enter into contracts with such agency, as shall be desig-
nated by the President within 60 days after the effective date of 
this paragraph, to furnish articles, equipment, supplies, services, 
or materials, or to perform construction work for such agency. In 
any case in which the Administration certifies to any officer of 
such agency having procurement powers that the Administration 
is competent and responsible to perform any specific procure-
ment contract to be let by any such officer, such officer shall let 
such procurement contract to the Administration upon such terms 
and conditions as may be agreed upon between the Administration 
and the procurement officer. If the Administration and such pro-
curement officer fail to agree on such terms and conditions, either 
the Administration or such officer shall promptly notify, in writ-
ing, the head of such agency. The head of such agency shall have 
five days (exclusive of Saturdays, Sundays, and legal holidays) 
to establish the terms and conditions upon which such procure-
ment contract may be let to the Administration, and shall com-
municate in writing to the Administration the terms and 
conditions so established. Within five days (exclusive of Satur-
days, Sundays, and legal holidays) after the receipt of such 
written communication, the Administration shall decide whether 
to perform such procurement contract or withdraw its prior 
certification that the Administration is competent and responsible 
to perform such contract; and 
"(C) to arrange for the performance of such procurement 
contracts by negotiating or otherwise letting subcontracts to 
socially and economically disadvantaged small business concerns 
for construction work, services, or the manufacture, supply, assem-
bly of such articles, equipment, supplies, materials, or parts 
thereof, or servicing or processing in connection therewith, or 
such rnanagement services as may be necessary to enable the 
Administration to perform such contracts. 
"No contract may be entered into under subparagraph (B) after 
September 30,1980. 
39-194 O—80—pt. 2 
31 : QL3 
92 STAT. 1762 
PUBLIC LAW 95-507—OCT. 24, 1978 
Performance 
bonds. 
"Socially; and 
economically 
disadvantaged 
small business 
concern." 
Socially 
disadvantaged 
individuals. 
Economically 
disadvantaged 
individuals. 
"(2) Notwithstanding subsections (a) and (c) of the first section 
of the Act entitled 'An Act requiring contracts for the construction, 
alteration, and repair of any public building or public work of the 
United States to be accompanied by a performance bond protecting 
the United States and by additional bond for the protection of persons 
furnishing material and labor for the construction, alteration, or 
repair of said public buildings or public work,' approved August 24, 
1935 (49 Stat. 793), no small business concern shall be required to pro-
vide any amount of any bond as a condition of receiving any sub-
contract under this subsection if the Administrator determines that 
such amount is inappropriate for such concern in performing sudh 
contract: Provided^ That the Administrator shall exercise the author-
ity granted by the paragraph only if— 
" (A) the Administration takes such measures as it deems appro-
priate for the protection of persons furnishing materials and 
labor to a small business receiving any benefit pursuant to this 
paragraph; 
"(B) the Administration assists, insofar as practicable, a small 
business receiving the benefits of this paragraph to develop, 
within a reasonable period of time, sudh financial and other 
capability as may be needed to obtain such bonds as the Adminis-
tration may subsequently require for the successful completion 
of any program conducted under the authority of this subsection; 
"(C) the Administration finds that such small business is 
unable to obtain the requisite bond or bonds from a surety and 
that no surety is willing to issue such bond or bonds subject to 
the guarantee provisions of Title IV of the Small Business Invest-
ment Act of 1958; and 
"(D) the small business is determined to be a start-up concern 
and such concern has not been participating in any program con-
ducted under the authority of this subsection for a period exceed-
ing one year. 
"This paragraph shall not apply after September 30,1980. 
"(3) Any small business concern selected by the Administration 
to perform any Federal Government procurement contract to be let 
pursuant to this subsection shall, when practicable, participate in any 
negotiation of the terms and conditions of such contract. 
"(4) For purposes of this section, the term 'socially and economi-
cally disadvantaged small business concern' means any small business 
concern— 
"(A) which is at least 51 per centum owned by one or more 
socially and economically disadvantaged individuals; or, in the 
case of any publicly owned business, at least 51 per centum of the 
stock of which is owned by one or more socially and economically 
disadvantaged individuals; and 
"(B) whose management and daily business operations are con-
trolled by one or more of such individuals. 
"(5) Socially disadvantaged individuals are 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. 
" (6) Economically disadvantaged individuals are those socially dis-
advantaged individuals whose ability to compete in the free enterprise 
system has been impaired due to diminished capital and credit oppor-
tunities as compared to others in the same business area who are not 
socially disadvantaged. In determining the degree of diminished credit 
PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1763 
and capital opportunities the Administration shall consider, but not be 
limited to, the assets and net worth of such socially disadvantaged 
individual. 
"(7) No small business concern shall be deemed eligible for any 
assistance pursuant to this subsection unless the Administration deter-
mines that with contract, financial, technical, and management support 
the small business concern will be able to perform contracts which may 
be awarded to such concern under paragraph (1) (C) and has reason-
able prospects for success in competing in the private sector. 
" (8) All determinations made pursuant to paragraphs (4), (5), (6) 
and (7), shall be made by the Associate Administrator for Minority 
Small Business and Capital Ownership Development. 
"(9) Within ninety days after the effective date of this paragraph, 
the Administration shall publish in the Federal Register rules setting 
forth those conditions or circumstances pursuant to which a firm pre-
viously deemed eligible by the Administration may be denied assist-
ance under the provisions of this subsection: Provided^ That no such 
firm shall be denied total participation in any program conducted 
under the authority of this subsection without first being afforded a 
hearing on the record in accordance with chapter 5 of title 5, United 
States Code. 
"(10) The Administration shall develop and implement an outreach 
program to inform and recruit small business concerns to apply for 
eligibility for assistance under this subsection. 
' (11) To the maximum extent practicable, construction subcon-
tracts awarded by the Administration pursuant to this subsection shall 
be awarded within the county or State where the work is to 
be performed. 
" (12) To the maximum extent practicable the Associate Administra-
tor for Minority Small Business and Capital Ownership Develop-
ment shall submit, no less frequently than annually, a yearly estimate 
of the dollar amounts and types of contracts required for the efficient 
use of any program conducted under the authority of this subsection, 
to each agency which may participate in such program.". 
(b) Not later than June 30,1980, the General Accounting Office shall 
submit to the Congress a report which, with respect to provisions of 
paragraphs (1) (B) and (2) of section 8(a) of the Small Business Act, 
shall evaluate the implementation of such provisions and whether such 
implementation furthered the purposes under section 2(e) of the 
Small Business Act. 
SEC. 203. Section 2(c) of the Small Business Act is amended by 
inserting "(1)" after "(c)" and by adding at the end thereof the 
following new paragraph: 
"(2) (A) With respect to the programs authorized by section 7(j) 
of this Act, the Congress finds— 
"(i) that ownership and control of productive capital is con-
centrated in the economy of the United States and certain groups, 
therefore, own and control little productive capital; 
"(ii) that certain ^oups in the United States own and control 
little productive capital because they have limited opportunities 
for small business ownership; 
"(iii) that the broadening of small business ownership among 
groups that presently own and control little productive capital is 
essential to provide for the well-being of this Nation by promoting 
their increased participation in the free enterprise system of the 
United States; 
Determinations. 
Publication in 
Federal Register. 
Annual estimate. 
Report to 
Congress. 
15 u s e 637 note. 
Ante, p. 1761. 
Ante, p. 17 60. 
15 u s e 631. 
Post, p. 176(4. 
92 STAT. 1764 
PUBLIC LAW 95-507—OCT. 24, 1978 
Infra. 
15 use 636. 
Technical and 
management 
assistance. 
"(iv) that such development of business ownership among 
groups that presently own and control little productive capital 
will be greatly facilitated through the creation of a small business 
ownership development program, which shall provide services, 
including, but not limited to, financial, management, and technical 
assistance. 
" (v) that the power to let sole source Federal contracts pursuant 
Ante, p. 1761. 
to section 8(a) of the Small Business Act can be an effective pro-
curement assistance tool for development of business ownership 
among groups that own and control little productive capital; and 
"(vi) that the procurement authority under section 8(a) of the 
Small Business Act shall be used only as a tool for developing 
business ownership among groups that own and control little 
productive capital. 
"(B) It is, therefore, the purpose of the programs authorized by 
section 7 (j) of this Act to— 
"(i) foster business ownership by individuals in groups that 
own and control little productive capital; and 
"(ii) promote the competitive viability of such firms by cre-
ating a small business and capital ownership development 
program to provide such available financial, technical, and man-
agement assistance as may be necessary.". 
SEC. 204. Section 7(j) of the Small Business Act is amended to read 
as follows: 
"(i)(l) The Administration shall provide financial assistance to 
public or private organizations to pay all or part of the cost of 
projects designed to provide technical or management assistance to 
individuals or enterprises eligible for assistance under sections 7(i), 
7(j) (10), and 8(a) of this Act, with special attention to small busi-
nesses located in areas of high concentration of unemployed or low-
income individuals, to small businesses eligible to receive contracts 
pursuant to section 8(a) of this Act. 
"(2) Financial assistance under this subsection may be provided 
for projects, including, but not limited to— 
"(A) planning and research, including feasibility studies and 
market research; 
"(B) the identification and development of new business 
opportunities; 
"(C) the furnishing of centralized services with regard to 
public services and Federal Government programs including pro-
grams authorized under sections 7(i), (7)(j)(10), and 8(a) of 
this Act; 
"(D) the establishment and strengthening of business service 
agencies, including trade associations and cooperatives; and 
"(E) the furnishing of business counseling, management 
training, and legal and other related services, with special empha-
sis on the development of management training programs using 
the resources of the business community, including the develop-
ment of management training opportunities in existing business, 
and with emphasis in all cases upon providing management train-
ing of sufficient scope and duration to develop entrepreneurial 
and managerial self-sufficiency on the part of the individuals 
served. 
"(3) The Administration shall encourage the placement of subcon-
tracts by businesses with small business concerns located in areas of 
high concentration of unemployed or low-income individuals, with 
small businesses owned by low-income individuals, and with small 
Subcontract 
placement with 
businesses 
located in certain 
PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1765 
businesses eligible to receive contracts pursuant to section 8(a) of this 
Act. The Administration may provide incentives and assistance to 
such businesses that will aid in the training and upgrading of potential 
subcontractors or other small business concerns eligible for assistance 
under sections 7 (i), 7 (j), and 8 (a) of this Act. 
"(A) An advisory committee composed of five high-level offi-
cers from five United States businesses and five representatives 
of minority small businesses shall be created to facilitate the 
achievement of the purposes of this paragraph. The members of 
the advisory committee shall be appointed by the President. The 
chairman of the advisory committee, who shall be designated by 
the President shall report annually to the President and to the 
Congress on the activities of the advisory committee. 
"(B) The General Accounting Office shall evaluate the activi-
ties taken by the Administration to achieve the purpose of this 
paragraph and evaluate the success of these activities in achieving 
the purposes of this paragraph. The General Accounting Office 
shall report to the Congress by January 1, 1981, and at any time 
thereafter at the discretion of the Comptroller General, on the 
findings of this evaluation and shall make recommendations on 
actions needed to improve the Administration's performance pur-
suant to this paragraph. 
"(4) The Administration shall give preference to projects which 
promote the ownership, participation in ownership, or management of 
small businesses owned by low-income individuals and small businesses 
eligible to receive contracts pursuant to section 8(a) of this Act. 
" (5) The financial assistance authorized for projects under this sub-
section includes assistance advanced by grant, agreement, or contract. 
"(6) Tlie Administration is authorized to make payments under 
grants and contracts entered into under this subsection in lump sum 
or installments, and in advance or by way of reimbursement, and in 
the case of grants, with necessary adjustments on account of overpay-
ments or underpayments. 
"(7) To the extent feasible, services under this subsection shall be 
provided in a location which is easily accessible to the individuals and 
small business concerns served. 
" (8) The General Accounting Office shall provide for an independ-
ent and continuing evaluation of programs under sections 7(i), 7(j), 
and 8(a) of this Act, including full information on, and analysis of, 
the character and impact of managerial assistance provided, the loca-
tion, income characteristics, and extent to which private resources and 
skills have been involved in these jjrograms. Such evaluation together 
with any recommendations deemed advisable by the Comptroller Gen-
eral shall be reported to the Congress by January 1, 1981, and at any 
time thereafter at the discretion of the Comptroller General. 
"(9) The Administration shall take such steps as may be necessary 
and appropriate, in coordination and cooperation with the heads of 
other Federal departments and agencies, to insure that contracts, sub-
contracts, and deposits inade by the Federal Government or with 
programs aided with Federal fimds are placed in such way as to 
furtlier the purposes of sections 7(i), 7(j), and 8(a) of this Act. 
"(10) There is established within the Administration a small busi-
ness and ca])ital ownership development program 
(hereinafter 
referred to as the 'Program') which shall provide assistance exclu-
sively for small business concerns eligible to receive contracts pur-
suant to section 8(a) of this Act. The management of the Program 
shall be vested in the Associate Administrator for Minority Small 
Ante, p. 1761. 
15 u s e 636. 
Ante, p. 1764. 
Advisory 
committee, 
establishment. 
Membership. 
Report to 
Congress. 
Grants and 
contracts. 
Program 
evaluation. 
Report to 
Small business 
and capital 
ownership 
development 
program, 
establishment. 
92 STAT. 1766 
PUBLIC LAW 95-507—OCT. 24, 1978 
Business and Capital Ownership Development who shall also manage 
all other services and activities authorized under sections 7(i) and 
Ante, pp. 17614, 
8 (a) of this Act. 
J761. 
"(A) The Program shall— 
"(i) assist small business concerns participating in the 
Program to develop comprehensive business plans with spe-
cific business targets, objectives, and goals; 
" (ii) provide for such other nonfinancial services as deemed 
necessary for the establishment, preservation, and growth 
of small business concerns participating in the Program, 
including but not limited to (I) loan packaging, (II) finan-
cial counseling, (III) accounting and bookkeeping assist-
ance, (IV) marketing assistance, and (V) management 
assistance; 
"(iii) assist small business concerns participating in the 
Program to obtain equity and debt financing; 
^ 
^ 
"(iv^) establish 
regular performance 
monitoring 
and 
reporting systems for small business concerns participating 
in the Program to assure compliance with their business 
plans; 
"(v) analyze and report the causes of success and failure 
of small business concerns participating in the Program; 
and 
"(vi) provide assistance necessary to help small business 
concerns participating in the Program to procure surety 
bonds, with such assistance including, but not limited to, (I) 
the preparation of application forms required to receive a 
1 
surety bond, (II) special management and technical assist-
ance designed to meet the specific needs of small business 
concerns participating in the Program and which have 
received or are applying to receive a surety bond, and (III) 
preparation of all forms necessary to receive a surety bond 
guarantee from the Adma.iiistration pursuant to title IV, part 
15 use 694a. 
B of the Small Business Investment Act of 1958. 
•*'(B) Small business concerns eligible to receive contracts pur-
suant to section 8(a) of this Act shall participate in the Program. 
"(C) No small business concern shall receive a contract pur-
suant to section 8(a) of this Act unless the Program is able to 
provide such small business concern with, but not limited to, such 
management, technical, and financial services as may be necessary 
to promote the competitive viability of the small business concern 
within a reasonable period of time. 
Responsibilities. 
"(11) The Associate Administrator for Minority Small Business 
and Capital Ownership Development shall be responsible for coor-
dinating and formulating policies relating to Federal assistance to 
small business concerns eligible for assistance under section 7(i) of 
this Act and small business concerns eligible to receive contracts pur-
suant to section 8(a) of this Act.". 
15 use 636. 
SEC. 205. Section 7(k) of the Small Business Act is amended by 
striking the words "7(i) and 7(j)" and inserting in lieu thereof "7(i), 
7(j), and 8(a)". 
15 use 633. 
SEC. 206. Section 4 (b) of the Small Business Act is amended by 
striking "Associate Administrator for Minority Small Business" 
where it appears therein and by substituting the following: "Asso-
ciate Administrator for Minority Small Business and Capital Owner-
ship Development". 
PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1767 
SEC. 207. Nothing in this chapter is intended to duplicate or limit 15 USC 647 note, 
any programs or projects administered by the Department of 
Commerce. 
CHAPTER 2 
SEC. 211. Section 8 (d) of the Small Business Act is amended to read 
as follows: 
"(d) (1) It is the policy of the United States that small business 
concerns, and small business concerns owned and controlled by socially 
and economically disadvantaged individuals, shall have the maximum 
practicable opportunity to participate in the performance of contracts 
let by any Federal agency. 
"(2) The clause stated in paragraph (3) shall be included in all 
contracts let by any Federal agency except any contract which— 
" (A) does not exceed $10,000; 
"(B) including all subcontracts under such contracts will be 
performed entirely outside of any State, territory, or possession 
of the United States, the District of Columbia, or the Common-
wealth of Puerto Rico; or 
"(C) is for services which are personal in nature. 
"(3) The clause required by paragraph (2) shall be as follows: 
" '(A) It is the policy of the United States that small business 
concerns and small business concerns owned and controlled by 
socially and economically disadvantaged individuals shall have 
the maximum practicable opportunity to participate in the per-
formance of contracts let by any Federal agency. 
"'(B) The contractor hereby agrees to carry out this policy 
in the awarding of subcontracts to the fullest extent consistent 
with the ej[ficient performance of this contract. The contractor fur-
ther agrees to cooperate in any studies or surveys as may be con-
ducted by the United States Small Business Administration or 
the awarding agency of the United States as may be necessary 
to determine the extent of the contractor's compliance Avith this 
clause. 
"'(C) As used in this contract, the term "small business con-
cern" shall mean a small business as defined pursuant to section 3 
of the Small Business Act and relevant regulations promulgated 
pursuant thereto. The term "small business concern owned and 
controlled by socially and economically disadvantaged individ-
uals" shall mean a small business concern— 
" '(i) which is at least 51 per centum owned by one or more 
socially and economically disadvantaged individuals; or, in 
the case of any publicly owned business, at least 51 per centum 
of the stock of which is owned by one or more socially and 
economically disadvantaged individuals; and 
"'(ii) whose management and daily business operations 
are controlled by one or more of such individuals. 
" 'The contractor shall presume that socially and economically 
disadvantaged individuals include Black Americans, Hispanic 
Americans, Native Americans, and other minorities, or any other 
individual found to be disadvantaged by the Administration pur-
suant to section 8(a) of the Small Business Act. 
'"(D) Contractors acting in good faith may rely on written 
representations by their subcontractors regarding their status as 
either a small business concern or a small business concern owned 
and controlled by socially and economically disadvantaged 
individuals.' 
Contract 
opportunities for 
certain small 
business 
concerns. 
15 USC 637. 
Definitions. 
15 USC 632. 
92 STAT. 1768 
PUBLIC LAW 95-507—OCT. 24, 1978 
Incentives for 
small business 
subcontracting. 
Subcontracting 
plans. 
"(4) (A) Each solicitation of an offer for a contract to be let by a 
Federal agency which is to be awarded pursuant to the negotiated 
method of procurement and which may exceed $1,000,000, in the case 
of a contract for the construction of any public facility, or $500,000, 
in the case of all other contracts, shall contain a clause notifying 
potential offering companies of the provisions of this subsection 
relating to contracts awarded pursuant to the negotiated method of 
procurement. 
"(B) Before the award of any contract to be let, or any amendment 
or modification to any contract let, by any Federal agency which— 
"(i) is to be awarded, or was let, pursuant to the negotiated 
method of procurement, 
"(ii) is required to include the clause stated in paragraph (3), 
"(iii) may exceed $1,000,000 in the case of a contract for the 
construction of any public facility, or $500,000 in the case of all 
other contracts, and 
" (iv) which offers subcontracting possibilities, 
the ai^parent successful offeror shall negotiate with the procurement 
uutliority a subcontracting plan which incorporates the information 
prescribed in paragraph (6). The subcontracting plan shall be 
included in and made a material part of the contract. 
"(C) If, within the time limit prescribed in regulations of the 
Federal agency concerned, the apparent successful off'eror fails to 
negotiate the subcontracting plan required by this paragraph, such 
offeror sliall become ineligible to be awarded the contract. Prior com-
pliance of the off'eror with other sucli subcontracting plans shall be 
considered by the Federal agency in determining the responsibility 
of that offeror for the award of the contract. 
"(D) No contract shall be awarded to any offeror unless the pro-
curement authority determines that the plan to be negotiated by the 
offeror pursuant to this paragraph provides the maximum practicable 
opportunity for small business concerns and small business concerns 
owned and controlled by socially and economically disadvantaged 
individuals to participate in the performance of the contract. 
"(E) Notwithstanding any other provision of law, every Federal 
agency, in order to encourage subcontracting opportunities for small 
business concerns and small business concerns owned and controlled 
by the socially and economically disadvantaged individuals as defined 
in paragraph (3) of this subsection, is hereby authorized to provide 
such incentives as such Federal agency may deem appropriate in order 
to encourage such subcontracting opportunities as may be commen-
surate with the efficient and economical performance of the contract: 
Provided^ That, this subparagrai)h shall apply onl}- to contracts let 
pursuant to the negotiated method of procurement. 
"(5) (A) Each solicitation of a bid for any contract to be let, or 
any amendment or modification to any contract let, by any Federal 
agency which— 
" (i) is to be awarded pursuant to the formal advertising method 
of procurement, 
"(ii) is required to contain the clause stated in paragraph (3) 
of this subsection, 
"(iii) may exceed $1,000,000 in the case of a contract for the 
construction of any public facility, or $500,000, in the case of all 
other contracts, and 
" (iv) offers subcontracting possibilities, 
shall contain a clause requiring any bidder who is selected to be 
awarded a contract to submit to the Federal agency concerned a sub-
PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1769 
contracting plan which incorporates the information prescribed in 
paragraph (6). 
-
P
I 
"(B) If, within the time limit prescribed in regulations of the 
Federal agency concerned, the bidder selected to be awarded the con-
tract fails to submit the subcontracting plan required by this para-
graph, such bidder shall become ineligible to be awarded the contract. 
Prior compliance of the bidder with other such subcontracting plans 
shall be considered by the Federal agency in determining the respon-
sibility of such bidder for the award of the contract. The subcon-
tracting plan of the bidder awarded the contract shall be included 
in and made a material part of the contract. 
"(6) Each subcontracting plan required under paragraph (4) or 
(5) shall include— 
"(A) percentage goals for the utilization as subcontractors of 
small business concerns and small business concerns owned and 
controlled by socially and economically disadvantaged indi-
viduals ; 
"(B) the name of an individual within the employ of the 
offeror or bidder who will administer the subcontracting pro-
gram of the offeror or bidder and a description of the duties of 
such individual; 
"(C) a description of the efforts the offeror or bidder will take 
to assure that small business concerns and small business concerns 
owned and controlled by the socially and economically disad-
vantaged individuals will have an equitable opportunity to com-
pete for subcontracts; 
"(D) assurances that the offeror or bidder will include the 
clause required by paragraph (2) of this subsection in all sub-
contracts which offer further subcontracting opportunities, and 
that the offeror or bidder will require all subcontractors (except 
small business concerns) who receive subcontracts in excess of 
$1,000,000 in the case of a contract for the construction of any 
. 
public facility, or in excess of $500,000 in the case of all other 
contracts, to adopt a plan similar to the plan required under 
paragraph (4) or (5); 
"(E) assurances that the offeror or bidder will submit such 
periodic reports and cooperate in any studies or surveys as may 
be required by the Federal agency or the Administration in order 
to determine the extent of compliance by the offeror or bidder 
with the subcontracting plan; and 
"(F) a recitation of the types of records the successful offeror 
or bidder will maintain to demonstrate procedures which have 
been adopted to comply Avith the requirements and goals set forth 
in this plan, including the establishment of source lists of small 
business concerns and small business concerns owned and con-
trolled by socially and economically disadvantaged individuals; 
and efforts to identify and award subcontracts to such small 
business concerns. 
"(7) The provisions of paragraphs (4), (5), and (6) shall not apply 
to offerors or bidders who are small business concerns. 
"(8) The failure of any contractor or subcontractor to comply in Breach of 
good faith with— 
contract. 
"(A) the clause contained in paragraph (3) of this subsection, 
or 
"(B) any plan required of such contractor pursuant to the 
authority of this subsection to be included in its contract or 
subcontract, 
shall be a material breach of such contract or subcontract. 
92 STAT. 1770 
PUBLIC LAW 95-507—OCT. 24, 1978 
Review. 
Subcontracting 
plans, compliance 
evaluation. 
Report to 
congressional 
committees. 
"(9) Nothing contained in this subsection shall be construed to 
supersede the requirements of Defense Manpower Policy Number 4A 
(32A CFR Chap. 1) or any successor policy. 
"(10) In the case of contracts within the provisions of paragraphs 
(4), (5), and (6), the Administration is authorized to— 
"(A) assist Federal agencies and businesses in complying with 
their responsibilities under the provisions of this subsection, 
including the formulation of subcontracting plans pursuant to 
paragraph (4); 
"(B) review any solicitation for any contract to be let pursuant 
to paragraphs (4) and (5) to determine the maximum practicable 
opportunity for small business concerns and small business con-
cerns owned and controlled by socially and economically disad-
vantaged individuals to participate as subcontractors in the 
performance of any contract resulting from any solicitation, and 
to submit its findings, which shall be advisory in nature, to the 
appropriate Federal agency; and 
"(C) evaluate compliance with subcontracting plans, either on 
a contract-by-contract basis, or in the case contractors having 
multiple contracts, on an aggregate basis. 
"(11) At the conclusion of each fiscal year, the Administration shall 
submit to the Senate Select Committee on Small Business and the 
Committee on Small Business of the House of Eepresentatives a report 
on subcontracting plans found acceptable by any Federal agency 
which the Administration determines do not contain maximum prac-
ticable opportunities for small business concerns and small business 
concerns owned and controlled by socially and economically disad-
vantaged individuals to participate in the performance of contracts 
described in this subsection.". 
15 use 644. 
Reports to Small 
Business 
Administration. 
Submittal of 
information to 
congressional 
committees. 
CHAPTER 3 
SEC. 221. Section 15 of the Small Business Act is amended by adding 
at the end of subsection (f) the following new subsections: 
" (g) The head of each Federal agency shall, after consultation with 
the Administration, establish goals for the participation by small 
business concerns, and by small business concerns owned and con-
trolled by socially and economically disadvantaged individuals, in 
procurement contracts of such agency having values of $10,000 or 
more. Goals established under this subsection shall be jointly estab-
lished by the Administration and the head of each Federal agency 
and shall realistically reflect the potential of small business con-
cerns and small business concerns owned and controlled by socially 
and economically disadvantaged individuals to perform such contracts 
and to perform subcontracts under such contracts. Whenever the 
Administration and the head of any Federal agency fail to agree 
on estaWished goals, the disagreement shall be submitted to the 
Administrator of the Office of Federal Procurement Policy for final 
determination. 
"(h) At the conclusion of each fiscal year, the head of each Fed-
eral agency shall report to the Administration on the extent of par-
ticipation by small business concerns and small business concerns 
owned and controlled by socially and economically disadvantaged indi-
viduals in procurement contracts of such agency. Such reports shall 
contain appropriate justifications for failure to meet the goals estab-
lished under subsection (g) of this section. The Administration shall 
submit to the Select Committee on Small Business of the Senate and 
PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1771 
the Committee on Small Business of the House of Representatives 
information obtained from such reports, together with appropriate 
comments. 
"(i) Nothing in this Act or any other provision of law precludes 
exclusive small business set-asides for procurements of architectural 
and engineering services, research, development, test and evaluation, 
and each Federal agency is authorized to develop such set-asides to 
further the interests of small business in those areas. 
" (j) Each contract for the procurement of goods and services which 
has an anticipated value of less than $10,000 and which is subject to 
small purchase procedures shall be reserved exclusively for small 
business concerns unless the contracting officer is unable to obtain offers 
from two or more small business concerns that are competitive with 
market prices and in terms of quality and delivery of the goods or 
services being purchased. In utilizing small purchase procedures, con-
tracting officers shall, wherever circumstances permit, choose a method 
of payment which minimizes paperwork and facilitates prompt pay-
ment to contractors. 
" (k) There is hereby established in each Federal agency having pro-
curement powers an office to be known as the 'Office of Small and Dis-
advantaged Business Utilization'. The management of each such office 
shall be vested in an officer or employee of such agency who shall— 
"(1) be known as the 'Director of Small and Disadvantaged 
Business Utilization' for such agency, 
" (2) be appointed by the head of such agency, 
"(3) be responsible only to, and report directly to, the head of 
such agency or to his deputy, 
" (4) be responsible for the implementation and execution of the 
functions and duties under sections 8 and 15 of this Act which 
relate to such agency, 
"(5) have supervisory authority over personnel of such agency 
to the extent that the functions and duties of such personnel relate 
to functions and duties under sections 8 and 15 of this Act, 
"(6) assign a small business technical adviser to each office to 
which the Administration has assigned a procurement center rep-
resentative— 
"(A) who shall be a full-time employee of the procuring 
activity and shall be well qualified, technically trained and 
' 
familiar with the supplies or services purchased at the activ-
ity, and 
"(B) whose principal duty shall be to assist the Adminis-
tration procurement center representative in his duties and 
functions relating to sections 8 and 15 of this Act, and 
" (7) cooperate, and consult on a regular basis, with the Adminis-
tration with respect to carrying out the functions and duties 
described in paragraph (4) of this subsection. 
"This subsection shall not apply to the Administration.". 
SEC. 222. The Administrator of the Office of Federal Procurement 
Policy is authorized and directed, pursuant to the authority conferred 
by Public Law 93-400 and subject to the procedures set forth in such 
Public Law, to promulgate a single, simplified, uniform Federal pro-
curement regulation and to establish procedures for insuring compli-
ance with such provisions by all Federal agencies. In formulating 
such regulations and procedures the Administrator of the Office of 
Federal Procurement Policy shall, in consultation with the Small 
Business Administration, conduct analyses of the impact on small 
business concerns resulting from revised procurement regulations, and 
Small purchase 
procedures. 
Office of Small 
and Disadvantaged 
Business 
Utilization, 
establishment. 
15 u s e 637, 
644. 
Uniform Federal 
procurement 
regulations and 
procedures. 
41 u s e 405a. 
41 u s e 401 note. 
92 STAT. 1772 
PUBLIC LAW 95-507—OCT. 24, 1978 
Information 
availability. 
15 use 637b. 
Definitions. 
15 use 637c. 
15 use 632. 
15 use 636. 
25 use 450b. 
15 use 644. 
Report to 
congressional 
committees. 
incorporate into revised procurement regulations simpliified -bidding, 
contract performance, and contract administration procedures for 
small business concerns. 
SEC. 223. (a) For any contract to be let by any Federal agency, 
such agency shall provide to any small business concern upon its 
request— 
(1) a copy of bid sets and specifications with respect to such 
contract; 
(2) the name and telephone number of an employee of such 
agency to answer questions with respect to such contract; and 
(3) adequate citations to each major Federal law or agency 
rule with which such business concern must comply in performing 
such contract. 
(b) Subsection (a) shall not apply to any contract or subcontract 
under such contract which— 
(1) will be performed entirely outside any State, territory, or 
possession of the United States, the District of Columbia, or the 
Commonwealth of Puerto Rico; or 
(2) is for services which are personal in nature. 
SEC. 224. (a) For purposes of this Act— 
(1) the term "Administrator" means the Administrator of the 
Small Business Administration; 
(2) the term "Federal agency" has the meaning given the term 
"agency" by section 551(1) of title 5, United States Code, but 
does not include the United States Postal Service or the General 
Accounting Office; and 
(3) the term "Government procurement contract" means any 
contract for the procurement of any goods or services by any Fed-
eral agency. 
(b) Section 3 of the Small Business Act is amended by inserting 
"(a)" after "Sec. 3." and by adding at the end thereof the following 
new subsection: 
"(b) For purposes of this Act, any reference to an agency or depart-
ment of the United States, and the term 'Federal agency', shall have 
the meaning given the term 'agency' by section 551 (1) of title 5, United 
States Code, but does not include the United States Postal Service or 
the General Accounting Office.". 
CHAPTER 4 
SEC. 231. Section 7(a) of the Small Business Act is amended by 
inserting after the phrase "The Administration is empowered to make 
loans to enable small-business concerns" the phrase ", or small-business 
concerns 100 percent owned and controlled by an Indian tribe as 
defined in section 4(a) of the Indian Self-Determination and Educa-
tion Assistance Act,". 
SEC. 232. Section 15(f) of the Small Business Act is amended by 
striking out "September 30, 1979" and inserting in lieu thereof "Sep-
tember 30, 1980". 
SEC. 233. Section 15 of the Small Business Act is amended by adding 
at the end thereof the following new subsection: 
" (1) (1) The President shall, not later than October 1,1979, transmit 
to the Select Committee on Small Business and the Committee on 
Armed Services of the Senate and to the Committee on Small Busi-
ness and the Committee on Armed Services of the House of Representa-
tives a report on the labor surplus area procurement program under 
this section and the manpower policy described in subparagraph (D). 
PUBLIC LAW 95-507—OCT. 24, 1978 
92 STAT. 1773 
Such report, together with recommendations, shall include, but not be 
limited to— 
" (A) an analysis of the effectiveness of such labor surplus area 
procurement program, including its effectiveness in creating jobs 
in the areas of high unemployment and the method by which labor 
markets are classified and designated as labor surplus areas ; 
"(B) its potential benefits to Federal, State and local govern-
ments, including tax benefits, reductions in Federal payments to 
labor surplus areas, and reductions in State unemployment costs 
where such information is available; 
"(^C) its potential costs, including its impact on the efficient 
utilization of Federal resources, its effect on the local economy of 
non-labor surplus areas, its impact on small business concerns not 
in labor surplus areas to the extent such information is available, 
and its impact on contract costs to the Federal Government; and 
"(D) with respect to the implementation by the Department of 
Defense of Defense Manpower Policy Number 4A (32A CFK 
Chapter 1) or any successor policy, in addition to the matters 
required by subparagraphs (A), (B), and (C), information con-
cerning the impact on such matters of the expenditure of any 
funds which were available for procurement and which were not 
obligated for expenditure on September 30,1977. 
Approved October 24, 1978. 
LEGISLATIVE HISTORY: 
HOUSE REPORTS: No. 95-949 (Comm. on Small Business) and No. 95-1714 (Comm. of 
Conference). 
SENATE REPORTS: No. 95-1070 (Select Comm. on Small Business) and No. 95-1140 
(Comm. on Governmental Affairs). 
CONGRESSIONAL RECORD, Vol. 124 (1978): 
Mar. 20, considered and passed House. 
Sept. 15, considered and passed Senate, amended. 
Oct. 6, House agreed to conference report, 
Oct. 10, Senate agreed to conference report.