8(a) Modernization Act

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, in recent years, the Federal marketplace has seen phenomenal growth. However, while procurement opportunities are increasing, agencies are failing to meet their small business, women, service-disabled veterans, minority and low-income contracting goals. This has not only cost small businesses billions of dollars in lost opportunities but deprives the government of a valuable supplier.

Our Nation's entrepreneurs play an important role in the procurement system, providing diversity, competition, and ensuring we get the best value for the taxpayers' dollar. To help them get a start, there is an array of contributing programs offering technical assistance, purchasing flexibility and targeted benefits. Unfortunately, due to legislative neglect, under funding and mismanagement by several administrations, the programs have fallen far short of their full potential, leaving many small businesses outside of the Federal marketplace.

The Small Business Contracting Program Improvements Act, introduced by myself and Representative Mary Fallin, will change that by making important improvements to women, minority, HUBZone and service-disabled veteran contracting programs. H.R. 3867 will immediately implement the Women's Procurement Program that has languished in the current administration's endless delays. It also updates the economic criteria for the 8(a) program, reflecting current fiscal realities. The last time Congress addressed the 8(a) program was almost 20 years ago, when a gallon of gas was 90 cents and the average cost of a home was less than $90,000. For too long we have forced minority businesses to operate under antiquated financial standards that in many cases were simply setting them up to fail.

Most importantly, this legislation will give our service-disabled veterans top priority when it comes to contracting. For those men and women returning from Iraq and Afghanistan, many with life-altering injuries, this bill will provide the tools to start a new endeavor and begin a new life. These changes would go a long way to addressing many of the program's shortcomings that have frustrated our Nation's small business owners.

Mr. Chairman, H.R. 3867 also fights fraud in the Federal marketplace. Contracting opportunities are a privilege, not a right. The Small Business Contracting Improvement Act makes that clear. For the first time, we are imposing a business code of conduct on all participants, requiring the Federal Government to verify that individuals are who they claim and empowering small firms to police their own programs. This will restore integrity to these critical programs.

Through modernizing programs and increasing accountability, H.R. 3867 brings SBA's contracting programs into the 21st century. It is for this reason that this legislation has attracted remarkably broad support, including the National Federation of Independent Business, the Associated General Contractors, the American Legion, Veterans of Foreign Wars, AMVETS, the U.S. Hispanic Chamber of Commerce, the National Black Chamber of Commerce, the U.S. Women's Chamber of Commerce, the International Franchise Association, as well as the National Defense Industrial Association and the Aerospace Industries Association.

This is a measured approach that balances the need to give program flexibility within the realities of current agency buying strategies. It is good for small business, good for the agency, and, most importantly, good for taxpayers.

I urge my colleagues to support this legislation.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 2 minutes to a member of the Small Business Committee, the gentleman from Pennsylvania (Mr. Sestak).

Mr. Chairman, I yield to the gentlewoman from New York (Ms. Clarke), a member of the committee and a cosponsor of the bill, for 2 minutes.

Mr. Chairman, I yield 2 minutes to the gentleman from Texas (Mr. Reyes), an original cosponsor of the legislation and chairman of the Intelligence Committee.

Mr. Chairman, I yield 2 minutes to the gentleman from California (Mr. Baca), chairman of the Congressional Hispanic Caucus.

(Mr. BACA asked and was given permission to revise and extend his remarks.)

Mr. Chairman, I yield to Mrs. Tubbs Jones from Ohio, the chairwoman of the Committee on Standards of Official Conduct, 2 minutes.

Mr. Chairman, I have no further speakers and I am prepared to close if the gentleman is prepared to close.

Mr. Chairman, the improvements made under H.R. 3867 are commonsense changes that would modernize and increase program accountability. Coupled with the sweeping reform the House passed earlier this year to our procurement system, this bill will have an immediate impact on every facet of the small business community, including women, minorities and service-disabled veterans.

It is for these reasons H.R. 3867 has some of the most diverse support of any bill coming out of the committee this year, ranging from small business trade groups including NFIB, the International Franchise Association and the Associated General Contractors to minority advocates such as the Black, Hispanic and Women's Chambers of Commerce. It also has the support of veterans groups, including the American Legion, VFW and AMVETS, as well as Aerospace Industries Association and the National Defense Industrial Association.

With the passage of H.R. 3867, we increase opportunities for entrepreneurs to become valuable suppliers to the Federal Government, recognizing their contribution to the economy.

I just would like to take a moment to thank the staff that worked on this legislation: from the Small Business Committee majority staff, Adam Minehardt, LeAnn Delaney and Michael Day; from the minority staff, Barry Pinclis and Kevin Fitzpatrick; and Nate Webb from Ms. Fallin's staff.

I strongly urge my colleagues to vote for H.R. 3867, Small Business Contracting Program Improvements Act.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I offer an amendment.

Mr. Chairman, this amendment makes changes to the underlying bill to address outstanding issues in the bill. It ensures those veterans that are most severely disabled will have access to contracts. It also strengthens the business integrity standard and creates parameters to carry out the women's procurement program.

Probably the most critical change in this amendment is the priority created for severely disabled veterans. The underlying bill already ensures that service-disabled veterans have greater access to contracts, but this takes it a step further.

It provides that agencies who are carrying out the service-disabled veteran contracting program give special consideration to those returning entrepreneurs that have the most serious of injuries. It is simply the right thing to do for all these soldiers have given for their country.

This amendment also provides taxpayers with greater protection by making certain the SBA performs criminal background checks prior to entering a program. It provides that those with criminal convictions are presumed to lack the business integrity required for participation.

Finally, we worked with the minority to create a more workable standard for allowing the SBA to carry out the women's procurement program. This amendment specifies the industries that the Rand Corporation determined, in accordance with direction from the National Academies of Sciences, were underrepresented by women businesses.

These measures will strengthen the bill to ensure a variety of deserving small businesses have better access to Federal contracts.

I urge adoption of the amendment.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I just want to thank the gentleman from Ohio for working with me on this amendment. I urge adoption of the amendment, and I yield back my time.

Mr. Chairman, while not opposed to the amendment, I ask unanimous consent to claim the time in opposition.

Mr. Chairman, I would like to thank my colleague from Missouri, a member of the Small Business Committee, for offering this amendment. I share the gentleman's concern about the concentration of contracts in the 8(a) program.

In fact, these businesses are only in the program for 9 years, so it is important that they make that time count. Unfortunately, according to partial year data for 2006, the top 10 companies received 40 percent of the work; 93 percent of companies received no contracts.

The gentleman's amendment requires the SBA to conduct a study to determine how best to provide additional contracting help to these less successful 8(a) participants. I appreciate his interest in the 8(a) program and his willingness to work with us to find a solution to a long-standing program.

I agree with my colleague that, while a more successful firm is apt to receive more work than a less experienced company, the purpose of the program is business development. Given this, the SBA needs to provide increased contractual assistance to the companies that need it the most.

The gentleman's amendment would allow us additional time to work together to craft a solution to ensure that 8(a) businesses, regardless of their financial strength, will be able to earn contracts. I look forward to working with the gentleman to perfect this language, and I appreciate his cooperation.

We are prepared to accept this amendment, and I will yield to Mr. Chabot for any comments he may have.

Mr. Chairman, I urge support of this amendment.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, while I am not opposed to the amendment, I ask unanimous consent to claim the time in opposition.

Mr. Chairman, it is becoming increasingly concerning that companies may be receiving HUBZone contracting preferences inappropriately.

Since 2003, the SBA Inspector General has released two reports identifying the potential for contracting fraud in this program. Most recently, in 2006, the IG has found that more than 80 percent of companies are not eligible 3 years after they were approved. In nearly 20 States, we have identified multimillion dollar properties in areas designated as HUBZone. If a company located in one of these zones employed people who lived in similar conditions, they would be eligible for contracting preferences over small businesses.

The gentleman's amendment addresses the issue that some areas of the country are designated HUBZone. That should not be. At the same time, this will also require the SBA to examine why some deserving areas are not being designated appropriately. To resolve this inconsistency, the amendment requires the SBA to carry out a study that includes recommendations for alternative ways to evaluate HUBZone eligibility.

There is no rational reason why some of the most affluent areas in the country are eligible for government contracting preferences, while truly deserving areas are overlooked.

We are prepared to accept this amendment, and I will yield to Mr. Chabot for any comments he may have.

Mr. Chairman, I urge support of this amendment.

I yield back the balance of my time.

Mr. Chairman, I reserve the right to object.

I am surprised that the gentleman is withdrawing his amendment since I was prepared to accept the amendment. I think this is a problem that needs to be addressed. I am willing to work with the gentleman to address this issue.

Mr. Chairman, I withdraw my reservation.

Mr. Chairman, while not opposed to the amendment, I ask unanimous consent to claim time in opposition.

The gentleman's amendment reflects a sense of the House that laws requiring competition among only small businesses should apply to the General Services Administration's Federal supply schedules.

The GSA consistently points to nearly 80 percent of contracts under schedules going to small businesses. The reality is that as far as dollars, small firms get less than 40 percent. With the exception of the GSA schedules, every agency must ensure that small businesses are the priority for contracts valued at more than $2,500 and less than $100,000. Even when the GSA enters into a contract itself, not using the schedules, the SBA statute applies.

Recently, the GSA's general counsel has pointed to a conflict between the statute that authorizes the Federal supply schedules and the SBA statute. Because Congress has not spoken to the contradiction, GSA relies on its own interpretation.

GSA schedules represent billions of dollars in contracting opportunities that simply aren't available to small firms because of the GSA's incorrect interpretation of the statute. The gentleman's amendment will provide a direction that is missing between these conflicting statutes, an issue to be supported. Not only will small businesses see increased dollars as a result; taxpayers will receive lower costs due to the flexibility and efficiency that small firms are able to offer.

Mr. Chairman, I am prepared to accept this amendment, and I will yield to Mr. Chabot for any comments he may have.

I urge support for this amendment and I yield back the balance of my time.

Yes.

Mr. Chairman, I would like to thank the gentleman for offering this amendment.

Certainly, frivolous litigation is a problem in any scenario. Our justice system is a valuable tool for the good-faith settling of claims, but it is costly and time consuming, and should never be used for purposes other than what was originally intended. If incumbent contractors are, in fact, using the bid process size protest mechanisms to extend the length of contracts, this problem needs to be addressed.

Small businesses face enough barriers in their efforts to enter the Federal marketplace. Having to fight frivolous lawsuits should not be one of them. If businesses, particularly mega-contractors, are using their position to prevent qualified contractors from doing Federal work by exploiting a loophole, the American taxpayer loses out.

The gentleman's amendment addresses this issue by requiring a study to determine the number of relevant protests, the financial impact on small businesses, and recommendations for solving any problems discovered.

The protest process was designed to create due process, not to create unfair advantages. This study will help to determine if there is a problem that needs to be further addressed.

I appreciate the gentleman bringing attention to this small business barrier, and although frivolous lawsuits can be devastating for anyone in the business community, it can be a particular burden for smaller companies. Adding litigation costs to an already limited cash flow is unrealistic for many small businesses, and I will be interested to see if this is what they're being forced to do.

It would allow our committee to fully understand if further changes are needed.

We are prepared to accept this amendment, Mr. Chairman, and I will yield to Mr. Chabot for any comments he may have.

Mr. Chairman, I urge support of this amendment, and I yield back.

Mr. Chairman, the gentleman's amendment requires the SBA to review who should be considered socially disadvantaged for entry into the 8(a) program and whether there should be any updates.

Prior to today, the last Congressional action on the 8(a) program took place in 1988. For nearly 20 years, the 8(a) program has not seen one significant change. One aspect of the program, social disadvantage, has also remained unchanged.

My colleague's amendment recognizes that our country in 2007 does not look like it did in 1988. The face of America is changing. The 8(a) program must reflect the new look of the Nation.

This amendment addresses the concern that in several years the SBA has not reviewed or expanded who is considered socially disadvantaged. Given this, deserving business owners are likely being shut out.

We also know, as members of the committee, that without definite direction the SBA is unlikely to act, let alone in a timely fashion. The gentleman's amendment will ensure that the SBA examines the issue and makes changes, as appropriate, within 6 months.

We are prepared, Mr. Chairman, to accept this amendment, and I will yield to Mr. Chabot for any comments that he might have.

Mr. Chairman, I urge the adoption of this amendment, and I yield back the balance of my time.

Mr. Chairman, the amendment offered by Ms. Ginny Brown-Waite seeks to ensure that taxpayer dollars go to small businesses that are complying with our immigration laws and not benefiting those that are breaking these laws.

While currently the Small Business Administration's Act prohibits the use of funds to benefit or assist individuals that are not lawfully within the United States, this change would allow for greater accountability. Creating a liaison between the Small Business Administration and the Department of Homeland Security on this matter will increase oversight and ensure that the agency's budget is being spent lawfully, efficiently and responsibly.

I also am grateful to have an ally in fighting this administration's efforts to reduce resources at the Small Business Administration. The fact is that the Small Business Administration needs personnel in carrying out this provision, as well as other critical operations.

We share the goal of ensuring that no funds expended under the Small Business Contracting Programs Improvement Act are used in such a manner. Sometimes having a law on the books isn't enough, and this amendment will go a step further in making sure that someone is there at the SBA actively enforcing this important spending provision.

We are prepared to accept this amendment, Mr. Chairman, and now I will yield to Mr. Chabot for any comments he may have.

Mr. Chairman, I want to thank my colleague from New York for her amendment to ensure that Federal contractors are complying with the immigration laws of our Nation. I would like to ensure that the interpretation of the debarment provisions referenced in the gentlewoman's amendment are consistent with the debarment process as provided in the Federal Acquisition Regulation.

Mr. Chairman, small businesses face many obstacles in securing a workforce, and one of them is ensuring that their employees have the proper legal status. All of our employers are expected to comply with our immigration laws, and they should not be forced to compete in the Federal marketplace with those who are skirting these laws. Small businesses should be rewarded for ensuring that their employees are here legally.

My colleague's amendment ensures that no contractor who has a pattern of knowingly employing unauthorized workers will receive contracts under the Small Business Contracting Program Improvements Act. Furthermore, contractors found to be in violation of the employment provisions required under immigration law will face the possibility of debarment.

Participation in SBA's procurement programs is a privilege and not a right. As such, we expect participants to uphold the law. Those businesses that choose not to comply should not receive the benefits of SBA contract assistance.

I appreciate the gentlewoman's attention to this issue and commitment to ensuring that contractors who choose to violate immigration law will not benefit from it. While there may be disagreement on reforming our immigration system, we all agree that employers must comply with those laws that are on the books. This is simply a matter of fairness.

We are prepared to accept the amendment, and I will yield to Mr. Chabot for any comments he may have.

Mr. Chairman, I urge support of this amendment, and I yield back the balance of my time.

Mr. Chairman, I want to thank my colleague from Texas for his amendment.

Fiscal responsibility is a serious issue, and so is running an effective government. As we are currently operating with a budget deficit, we must do all we can to eradicate wasteful spending. Many times we focus on larger issues of waste and abuse and forget about the smaller problems that would be easier to solve. When we cut costs, even just a little, it can add up to big savings.

The SBA has consistently been asked to do more with less. Placing these restrictions on SBA funds will reduce unnecessary spending, giving the agency more money to use to truly assist small businesses. An agency already operating with less than its ideal budget should not be spending crucial funds on premium travel.

I appreciate the gentleman's attention to this issue and his effort to increase accountability in our government and require responsible spending decisions.

Mr. Chairman, I am prepared to accept this amendment, and I will yield to Mr. Chabot for any comments he may have.

I am.

Mr. Speaker, this is simple. This motion to recommit will take away contracts from veterans with service disabilities.

At this time, I would like to submit for the Record a letter from the American Legion that clearly states, ``We steadfastly oppose any amendments to alter the legislation's provisions that assist veteran- owned businesses in section 101.''

The American Legion,

Washington, DC, October 17, 2007.

Hon. Nydia M. Velazquez,

Chairwoman, House Committee on Small Business,

Rayburn House Office Building, Washington, DC.

Dear Chairwoman Velazquez: On behalf of the 2.7 million

members of The American Legion I am writing to strongly

endorse the Small Business Contracting Program Improvements

Act, which is scheduled for markup in the Committee on Small

Business as early as this week. Further, we steadfastly

oppose any amendments to alter the legislation's provisions

that assist veteran-owned businesses in section 101.

Recently, the entrepreneurial needs of America's veterans

have been brought to the forefront, particularly those that

have sustained a disability as a result of their active-duty

service in the armed forces. With nearly a quarter of newly

discharged veterans considering starting their own

businesses, the importance of opening the federal marketplace

to veterans, who are entrepreneurs, has never before been so

important.

Unfortunately, there has been no appreciable progress

toward meeting the three percent service-connected disabled

veterans' government-wide contracting goal. Federal agencies

have fallen well short, accomplishing levels of only 0.2

percent in 2003; 0.4 percent in 2004; 0.6 percent in 2005;

and 0.9 percent in 2006. As a result, Congress must take

stronger action.

We are pleased that the Small Business Contracting Program

Improvements Act takes the clear and compelling action

necessary to ensure that veterans receive their fair share of

federal contracting opportunities. This legislation will

result in increases to contracts awarded to veteran-owned

companies. As the veterans' community continues to grow, the

time is now to enact this important initiative.

We thank you, Chairwoman Velazquez, for introducing this

legislation and we applaud the Committee for moving this

measure in an expeditious manner. The American Legion looks

forward to working with the Committee on this and future

legislation to assist this country's small businesses.

Sincerely,

James E. Koutz,

Chairman, National Economic Commission.

The ranking member knows that this amendment was introduced in the committee's markup and it was defeated 16-8.

Further, let me say that the underlying bill ensures that service- disabled veterans are given a preference in seeking Federal contracts. These individuals have consistently been shut out of the Federal contracts. Despite a 3 percent service-disabled veteran contracting goal since 1999, the highest accomplishment is less than 1 percent. These men and women have served our country, and they deserve better.

If the motion to recommit is adopted, and I want to make this clear, if this motion to recommit is adopted, veterans will no longer be a top priority. There will be no guarantee that service-disabled veterans will benefit from additional contracting opportunities. Instead, we would have competing programs, which is what we tried in this bill to rid ourselves of. Agencies will be more inclined to overlook disabled veterans in their award for sole source contracts.

And also, I would like to add for the Record, that this type of change is opposed by the American Legion, the National Black Chamber of Commerce, the Hispanic Chamber of Commerce, the U.S. Women's Chamber of Commerce, and the Associated General Contractors.

This motion will block business opportunity for service-disabled veterans. The American Legion opposed this motion, and we agree that this motion to recommit will be making it harder for veterans to secure Federal contracts.

You know, these are men and women coming back to our country from Afghanistan and Iraq. These are injured, service-disabled veterans who deserve the support of the American public and our Federal Government.

I ask Members to oppose this motion to recommit. As I mentioned, it was defeated 16-8 in the markup. This is merely an attempt at a second bite of the apple, and it should be defeated.

I would yield.

Let me just say to the gentleman that I don't know why you insist this section 101 to be stricken when you clearly know that this amendment was defeated in committee, not by Democrats, but Democrats and Republicans. It is opposed by every veteran organization in America.

Again, it will take Federal contracting away from disabled veterans. You know that we have failed these veterans before, and what we are doing is making sure that they have an opportunity to get a fair share of Federal contracts.

Mr. Speaker, I yield back the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I rise in opposition to H.R. 3867, the Small Business Contracting Program Improvements Act. I strongly support the provisions in the bill that help those Americans, veterans of our Armed Forces, who have provided the great sacrifices to defend our freedom and our way of life. However, there are other provisions that are sufficiently problematic that makes it impossible for me to support the overall bill.

In 1997, Congress established the Historically Underutilized Business Zone, or HUBZone program. The program is designed to assist areas of low income and high unemployment by providing incentives for government contractors to relocate in these areas and expand their operations. By making it easier for small businesses located in HUBZones to win Federal contracts, Congress expected more government contractors to relocate in these areas and provide an important component to their revitalization.

As anyone who has traveled through many urban and rural districts realizes, they have a large number of HUBZones. Unfortunately, H.R. 3867 could make it more difficult for HUBZone firms to win government contracts and thereby detract from the ability of this program to help revitalize urban and rural areas that need greater economic development.

Mr. Chairman, while I concur with the Chair of the committee that we need to ensure that only firms eligible for the HUBZone program participate, it is unnecessary to take punitive action against HUBZone firms as a result of a few bad actors. I am sure that if we scrutinize each of the procurement programs, we could find a few bad actors in each. That justifies taking appropriate legal action against the bad actors. It does not, in our view, necessitate punishing the firms that complied with the letter and spirit of the law.

It also is important to note that a number of the issues raised in this legislation are being addressed by the administrator of the SBA. I certainly understand the frustration that Members of Congress have when the executive branch does not implement legislation in a timely manner. Nevertheless, one aspect of this bill involves a program that has not been implemented for 7 years. While that normally would suggest further legislative action, the administrator, we believe, is doing everything possible at this point to issue rules, a process that can take time. In addition, the program is the subject of a lawsuit in which the plaintiffs have not sought any subsequent court action for nearly 2 years since the Federal Court ruled that the SBA violated the Administrative Procedure Act and failed to implement the program.

Mr. Chairman, I also would point out that the bill as reported out of committee, in our opinion, would only complicate the implementation of the procurement program. While I understand that the chairwoman will be offering an amendment to correct that problem, it does so by classifying 92 percent of the industries in the United States as historically underrepresented by women businesses and Federal procurement. While I concur that women are historically underrepresented in the Federal procurement arena, the amendment paints, we believe, with a broad, over-inclusive brush, and may include numerous industries in which businesses are not underrepresented by women entrepreneurs.

I also need to point out that the bill would classify individuals as economically disadvantaged if they have assets exclusive of their primary residence and their business up to $550,000. So over a half million dollars. According to research by our staff, roughly half the Members of Congress, half the Members of this body would qualify as economically disadvantaged under that standard. I find it very difficult to believe that the average American would consider a Member of Congress to be economically disadvantaged.

These are only some of our concerns about the bill that we have before us here today. While some of these concerns are technical in nature, my primary dispute with the bill is that it continues, unfortunately, to segment the small business government contracting arena. The result is that, in our opinion, rather than growing opportunities for all small businesses, it pits all of these deserving groups against one another. That, in our view, undermines their ability to speak as a united front in debates over Federal procurement policy that would promote all of their interests.

Despite my disagreement with the chairwoman, I do not doubt her sincere desire to improve the SBA contracting programs. The Chair and her staff, particularly Michael Day and Adam Minehardt, should be commended for their efforts in trying to find a solution that I, in good conscience, could have supported. However, the philosophical gap was simply too large to span. Therefore, I cannot support this legislation. I would urge my colleagues to vote ``no.''

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, we have no further speakers, and I continue to reserve the balance of my time.

Mr. Chairman, I continue to reserve.

Mr. Chairman, we have already stated our concerns about the bill in particular, but I would again emphasize the fact that the chairwoman did reach out, and her staff did as well. But philosophically, this was a bridge too far. We want to thank them again for working in a cooperative manner. This is a committee that under the Chair's direction has worked very much with the minority, and we want to thank them and hope that we

can continue to work together on bills in the future.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I ask unanimous consent to claim the time in opposition to the gentlelady's amendment, even though I do not oppose the amendment.

Mr. Chairman, her amendment makes some needed technical changes to the bill. Nevertheless, as I pointed out in my statement previously, we believe that this proposed solution to the failure of the SBA to implement the women's procurement is, in our view, overinclusive and should be further revised as the legislative process moves forward, but we do not oppose the amendment.

Mr. Chairman, I yield back my time.

I thank the gentlelady for yielding. We agree with the comments both in the gentleman's points he made in his presentation as well as the gentlelady's, and we support the amendment as well.

I thank the gentlelady for yielding.

Mr. Chairman, we have no opposition to this amendment. We would thank Mr. Welch of Vermont for his hard work on this and his leadership on the committee.

I thank the gentlelady for yielding.

Mr. Chairman, we have no opposition to this amendment. We would thank the gentleman for his hard work in offering the amendment.

Will the gentleman yield?

I was just going to say, that is the way this committee works, right, Madam Chair?

Thank you, Madam Chairwoman.

We do not oppose this amendment. We would thank the gentleman and his staff for their hard work and the research in considering this and offering the amendment.

I thank the gentlelady for yielding, and I thank the gentleman for offering his amendment. He has been willing to, I think, stand up and make courageous stands on occasion. I think he is to be commended for that.

Relative to this particular amendment, as I stated in my opening statement, I have some concerns of the bill in general because of the segmenting of various groups and sometimes pitting one against another and being competitive with each other, and so I can't say that I honestly would be in favor of a number of additional groups again further segmenting this.

But this just calls for a study and doesn't implement any particular groups or propose any additional new groups. So, for that reason, I would not oppose the amendment, and I want to thank him for his thoughtful consideration of this.

I thank the gentlelady for yielding. And I want to compliment and thank the gentlelady from Florida for offering this important amendment. I think it certainly is a good addition to the bill.

I think it's clear that most Americans would only want those that are in this country legally to benefit from these types of taxpayer-funded programs. So it's a very good amendment, and I want to thank you for offering it, and we certainly will support it.

I thank the gentlewoman for yielding.

I strongly support the gentlewoman from New York's amendment. I think it certainly improves the bill. It's just clear, I think, many, many Members on both sides of the aisle want to make clear that we don't think that taxpayer dollars ought to be going for illegal immigrants. And companies that are knowingly hiring people who are here illegally should not be able to benefit from any Federal dollars. And I think the gentlewoman by offering this amendment has improved the bill, and I want to thank her for offering this.

I thank the gentlewoman for yielding.

We do not oppose this amendment. I'm more used to dealing with the gentleman from Texas on some other issues, particularly his commitment as chairman of the Missing and Exploited Children's Caucus, and so many other issues. We have worked together on a whole range of issues attempting to protect children in this country. I want to thank him for his leadership in that area, and I also thank him for offering this amendment.

Mr. Speaker, I offer a motion to recommit.

Yes, I am, in its current form.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Bartlett from Maryland was previously going to offer the motion to recommit. He's not here; so I am going to offer it in his place, and I will be very brief.

This motion to recommit is really very simple. It reinstates the requirement that requires the government to set aside for competition contracts for small businesses located in HUBZones. As already noted, there is no reason to punish HUBZone firms by eliminating a mandatory competition requirement.

This motion will ensure that HUBZone firms will be able to carry out their purpose to redevelop low-income areas.

I also would just like to reiterate something that I said earlier when we were dealing with the overall bill in general, and that is that I want to again compliment the gentlelady from New York, Chairwoman Velazquez, for reaching out to the minority, as she has in the past, in trying to work together. There were just philosophical differences which could not be overcome on this bill. But the committee has worked very well together in a bipartisan manner, and I want to thank her for that cooperation.

It is my intention to continue to work together on bills in the future because we have supported most of the bills that come out of the Small Business Committee, and I think that's good for small business in this country because that's something that we do have in common, and that is, that we believe to our core that future job growth in this country is dependent upon the vitality of small businesses. And small businesses in this country have a lot of things that they have to deal with: high health insurance rates for their employees, energy costs that have been going through the roof, a tax structure which is, at this point, unclear as to where it's going to be in the future. That's why many of us on this side of the aisle believe to our core that we need to make those tax cuts that were passed back in 2001 and in 2003 permanent. We ought to allow small businesses to know what their taxes are going to be like next year and the year after and the year after so that they can depend upon that tax structure to grow their business and to make investments so that they can create jobs. Because ultimately, that's what it's all about, to keep the economy thriving so that we can create more and more jobs for people in this country. And keeping taxes low is probably the best thing that we can do to allow the small business community in this country to grow and prosper.

So again, I want to thank the members of the committee, the staff, and the gentlewoman for her cooperation and reiterate that, although a good-faith effort was made, we do support this motion to recommit and we do oppose and would urge my colleagues to oppose the overall bill.

Mr. Speaker, I yield back the balance of my time.

Would the gentlewoman yield?

I thank the gentlewoman for yielding.

It is our view that veterans would not be in any way adversely affected if this motion to commit were to pass because they are already covered by the sole source area in the bill. So we just have an honest disagreement on this. We believe there is no way that veterans would be adversely affected if this motion to recommit would be passed.

Mr. Speaker, I object to the vote on the ground that a quorum is not present and make the point of order that a quorum is not present.

Mr. Speaker, I demand a recorded vote.

Mr. Chairman, I rise in reluctant opposition to the Small Business Contracting Program Improvements Act (H.R. 3867). The aims of this legislation are noble. The purpose of this bill is to make a variety of changes--some long overdue--to several of the sub-small business federal contracting goals.

I commend the authors of H.R. 3867 for strengthening the procurement set-aside program for service-disabled veteran-owned small businesses in Title I. I also praise the effort to finally get the women's procurement program off the ground. During my tenure as chairman of the Small Business Committee, I was proud of my bipartisan work to pressure the SBA to implement this initiative. However, I remind my colleagues that under the new leadership of the administrator of the Small Business Administration, SBA, Steven Preston, more action has been taken in the past year to implement the women's procurement program than in the previous seven since the program was first created. The SBA is near completion of a final rule, which will pass constitutional muster, on the women's procurement program. Thus, I counsel continued patience and I hope that Title III in H.R. 3867 will not be needed.

However, I am disappointed that the increase in the size in contracts available to small manufacturers awarded without competition is not significantly increased. While Section 204 of H.R. 3867 provides a long-overdue inflationary increase to the contract limitation level for other small businesses, from $3 million to $5.1 million, the size for small manufacturers is increased by just $500,000--from $5 million to $5.5 million. This small increase diminishes the value of this benefit to U.S. small manufacturers, particularly as compared to other small businesses. To keep up with inflation and provide an equivalent benefit, this contract limitation should be increased to $8.5 million for small manufacturers.

This bill also unfortunately pits two sets of small businesses against each other--a minority small business development program 8(a) versus a procurement preference program that encourages small businesses to develop and hire local workers in economically-distressed areas of the country, otherwise known as Historically Underutilized Business, HUB, Zones. When I was chairman of the Small Business Committee, I never brought a bill to the House floor that helped one set of small businesses at the expense of another group of small businesses, particularly those

firms that are committed to redeveloping economically-distressed areas in both urban and rural America.

H.R. 3867 makes the 8(a) program more attractive while putting more hurdles in front of the HUBZone program. This is ironic because the Federal government has never met the 3 percent goal for HUBZones since its creation in 1996 but routinely meets and exceeds the 5 percent goal for minority or Small Disadvantaged Businesses, SDBs, of which 8(a) firms is a part.

A key blow to the HUBZone program is contained in Section 101(b) of H.R. 3867. This provision makes the HUBZone program discretionary or optional on the part of Federal contracting officers. This will only further discourage the use of HUBZone firms by the government to fulfill its procurement needs.

H.R. 3867 also requires an on-site inspection by SBA personnel of a small business to confirm HUBZone status prior to the award of their second program-related contract. Because of the limited resources at the SBA, this could delay the completion of contracts by weeks, if not months, while the HUBZone firm awaits this audit. Again, a Federal contracting official would be disinclined to use a HUBZone firm if it meant a longer time before a Federal agency would receive the good or service that was put out to bid. The non-partisan Congressional Budget Office, CBO, estimates that this provision alone would cost $62 million over the next 5 years to complete 5,000 on-site visits that would be performed each year. There are other ways to accomplish the same goal of making sure that HUBZone firms are in compliance with all the requirements of the law, including a closer review by the SBA of HUBZone applications, an expedited protest process by other small businesses, and enhanced criminal and civil penalties for false or misleading statements.

Finally, H.R. 3867 prohibits HUBZone construction firms from participating in projects more than 150 miles from its headquarters location. This would put a severe competitive disadvantage to HUBZone firms located in rural areas from performing work on Federal Government construction contracts located far away.

In the northern Illinois congressional district I am proud to represent, two entire mostly rural counties--Carroll and Stephenson-- are HUBZones. Also, HUBZones are located in certain urban parts of Winnebago County, mostly in the city center areas of Rockford along the Rock River that have suffered from the closure of numerous manufacturing facilities. This bill would put a further competitive disadvantage to any HUBZone firms located in the 16th District to compete for Federal business located even as close as the nearest major Federal procuring center in Illinois--Scott Air Force Base, which is about 300 miles away from Rockford and Freeport, Illinois.

While claiming to correct alleged abuses and fraud in the HUBZone program, H.R. 3867 opens up the 8(a) program to potential abuse by increasing the economic disadvantage threshold test above the average rate of inflation and applying this test only once upon entry into the program. The current economic disadvantage threshold level, which has not been changed since 1988, is $250,000. I agree that this level needs to be increased to compensate for inflation. However, H.R. 3867 raises this level to $550,000 even though the rate of inflation since 1988 would produce a result of $440,000, according to the Bureau of Labor Statistics. Also, the SBA currently applies this wealth test annually to ensure that the 8(a) program truly serves economically disadvantaged small business owners. Eliminating this yearly test could potentially lead to fraud if a wealthy person seeking entry into the 8(a) program is creative in shifting around their assets. H.R. 3867 would also allow multi-millionaires to remain in the 8(a) program for 10 years once they pass the first economic disadvantage test.

Most critically, H.R. 3867 does not deal with the fundamental problem in the 8(a) program cited in numerous SBA Office of Inspector General reports that 50 percent of the dollars obligated against 8(a) contracts went to a mere 1.7 percent of the 8(a) firms and over 70 percent of the eligible firms received no 8(a) contract benefit at all. Finally, H.R. 3867 also does not deal with the problem of large Alaska Native Corporations, ANCs, being able to participate in the 8(a) program and receive sole-sourced multi-million dollar contracts.

Because of these and other problems, the Bush Administration has issued a statement strongly opposing H.R. 3867, which I include for the Record. Thus, I respectfully urge my colleagues to oppose this legislation in order for these problems to be fixed.

Statement of Administration Policy--H.R. 3867--Small Business

Contracting Program Improvements Act

The Administration strongly opposes H.R. 3867, which would

modify the small business procurement programs of the Small

Business Administration. The Administration appreciates the

intent of H.R. 3867 to improve these programs and reduce the

potential for fraud and abuse. However, the Administration

believes that a number of the bill's elements would be

burdensome or undesirable. In addition, some provisions of

the bill raise significant constitutional concerns. The

Administration looks forward to working with Congress to

remedy the issues identified below.

The bill also eliminates the upper asset limit on economic

disadvantage for continued participation in the program,

essentially allowing an individual regardless of their wealth

or income to continue participating in the program for a full

10 years. The bill would raise the asset-test bar for

eligibility of individuals for the 8(a) program from $250,000

to $550,000, excluding equity in their home or their

business. As the 8(a) program is designed to reach

economically disadvantaged small business owners who have

diminished credit opportunities, the Administration believes

opening the program to small business owners with higher net

worth will divert 8(a) contracting opportunities well beyond

the original intent of the program.

H.R. 3867 would place a number of burdensome requirements

on the HUB Zone contracting program. The bill would prohibit

rural and Native American HUB Zone firms from obtaining

construction contracts more than 150 miles from their HUB

Zone principal office. The bill would also require on-site

evaluation of all HUB Zone firms prior to the award of their

second program-related contract. This provision would create

a large burden on the Small Business Administration, as these

firms are widely distributed and often located in rural

areas. The firms are already required to certify their status

prior to award of a contract, and false certification is a

felony with significant penalties. Also, the Small Business

Administration currently has a protest mechanism in place to

ensure the eligibility of firms for HUB Zone contracts.

The Administration is supportive of sections of H.R. 3867

that punish false representation of a firm as being owned by

service-disabled veterans and provisions that attempt to

assist such firms in the Federal contracting process.

However, the Administration is concerned about provisions

that would require that certain small business preference

programs take priority over other small business preference

programs.

H.R. 3867 would also increase dollar thresholds for

setting-aside non-competitive contracts in several of these

programs. Competition is a proven way of obtaining the best

performance and value for the government. Accordingly, any

non-competitive thresholds increase should be based on the

actual rate of inflation as reflected in regulatory changes

instituted by the SBA.

While the Administration supports opportunities for women-

owned small businesses (WOSBs) to compete for Federal

contracts, it opposes the bill's constitutionally suspect

creation of gender-based set-asides. In order to withstand

applicable equal protection standards, determinations of

under-representation that form the basis of set-asides must

be carefully controlled to assure that the pool of WOSBs

deemed available for the contracting opportunities in

question is limited to businesses that are eligible to

perform those contracts. The bill's provisions for the

identification of industries in which WOSBs are under

represented does not appear to satisfy that standard.

Additionally, authorizing individual agencies to make

determinations of under representation that will result in

contract set-asides based on sex will exacerbate such

constitutional concerns, since it is unlikely that such

determinations will be based upon the kind of thorough

statistical analysis required by the courts to justify such

set-asides under applicable case law.

Additionally, the bill's apparent expansion of the business

categories that will be eligible for race- or ethnicity-based

preferences in Federal contracting programs is subject to

strict scrutiny under governing equal protection standards.

Unless these provisions are supported by a sufficiently

current legislative record demonstrating that they are

narrowly tailored to further a compelling government

interest, such provisions may be vulnerable to constitutional

challenge.

Mr. Chairman, two weeks ago, the House agreed nearly unanimously to pass H.R. 3678, the Internet Tax Freedom Act Amendments Act. Most significantly, that bill would extend the Internet tax moratorium and grandfather protections for 4 years, clarify the treatment of gross receipts taxes, and revise the definition of Internet access.

As my distinguished colleague from North Carolina, Congressman Watt, stated on the floor that day, the House bill was ``an excellent example of what can occur when we work together--on both sides of the aisle--to deal with highly complex issues.''

Our bipartisan legislation was supported by industry groups such as the Don't Tax Our Web Coalition, as well as by various government organizations like the National Governors Association, the Federation of Tax Administrators, the National Conference of Mayors, and the National Conference of State Legislatures. It was also supported by a wide range of labor and union groups. And with that broad support, the House passed H.R. 3678 by a vote of 405-2.

The Senate has returned the bill to us with some amendments, and so now we are considering it again. There are four changes:

First, the Senate version extends the moratorium on State and local taxes on Internet access, with the grandfather protections, for 7 years, until November 1, 2014, rather than the 4 years in the House bill.

Second, the Senate version gives 7 months for certain States to adjust to a phase-out of additional grandfather protection they have been claiming.

Third, the Senate version expands the definition of Internet access to prohibit taxation of certain services which are fee-based, not packaged with Internet access, and offered from sources other than providers of Internet access.

Fourth, the Senate version prohibits a State from reimposing Internet access taxes under a grandfather clause if the State had eliminated those taxes more than 2 years ago.

While these lengthier time periods, expanded definitions, and tighter restrictions on the States go beyond where the House drew the line, I believe the new line is within reasonable bounds, and responds to many of the same considerations that motivated the House in crafting the version passed 2 weeks ago.

Like the House bill, the Senate version is designed to allow businesses sufficient time to plan, ensure that consumers continue to benefit from tax-free access to the Internet during this period, while enabling Congress to revisit the moratorium in light of developments in the States or in technology--as Congress had done each time it has extended the original moratorium--in 2001, 2004 and in this bill.

The Senate version remains true to the essential goals of the House bill, including our refinements to the definition of Internet access and our decision to provide a temporary extension of the moratorium. Like the House bill, it is designed to minimize adverse effects on State and local government revenue, to treat businesses fairly, and to keep Internet access affordable to consumers.

Nonetheless, we must be mindful of the potential misinterpretation of the new definition of Internet access. Therefore, I state our intent in revising the definition. H.R. 3678:

Alters the current definition of ``Internet access'' by making it clear that the prohibition on State and local taxation extends to that portion of a service that connects a user to the Internet and enables a user to navigate the Internet for the purpose of gaining access to the content, information and services that are available over the Internet (section 1105(5)(A) of the Internet Tax Freedom Act as amended by this bill). This new definition eliminates existing language that could have been interpreted to allow an Internet service provider to bundle content, information, and services that might otherwise be taxable with Internet access and claim that the entire package is exempt.

Preserves in subparagraph B of the new definition of Internet access changes made to the definition in the Internet Tax Nondiscrimination Act (P.L. 108-435) regarding the taxation of certain telecommunications. The language is modified in this bill only as to form to fit the new definition of Internet access as contained in this bill. The provision is intended to insure that all technologies used to access the Internet (e.g. cable, satellite, wireless, DSL, etc.) and the components used to provide the access are subject to the moratorium and protected from taxation by State and local governments. As noted in the Committee Report accompanying the bill that ultimately became Pub. L. No. 108-435 (Senate Report 108-155, 108th Congress, 1st Session, p. 4), the definition ``is not meant to affect States and local taxation of traditional telecommunications services and other services that are not used to provide Internet access. For example, the moratorium does not allow an Internet access provider to claim or to seek immunity from State or local taxes for the provision of other services--such as cable television programming--that are separate from Internet access. Nor does the moratorium exempt telecommunications services provided over the same facilities that are not used to provide Internet access.''

Clarifies in subparagraph C that services incidental to and provided with a connection to the Internet are not taxable. Such services are generally offered for free and provide the user with basic services to make the Internet functional for the user.

Addresses in subparagraph D concerns that the existing definition allows goods or services that are used or delivered over the Internet to become subject to the moratorium if they are offered as a package with Internet access. In 2004, concerns about the bundling provision led to a specific exception from the moratorium for voice-over- internet-protocol services. This section defines the VOIP exception of the current law as one of the services that is specifically excluded from Internet access and makes it clear that neither VOIP nor any other good or service that uses the Internet is subject to the moratorium. Since VOIP is specifically excluded from the definition of Internet access, the existing exception for VOIP was removed as redundant.

Includes in the new definition in subparagraph E certain services that would be subject to the moratorium under subparagraph C if offered with a service described in subparagraph A, are part of the moratorium even though they are fee-based and offered separately from a service described in subparagraph A. The list of services under this subparagraph is meant to be limited and exhaustive.

Mr. Chairman, H.R. 3678 as amended by the Senate remains a good, strong bill that provides much needed clarity to the communications and Internet industries, and strikes an appropriate balance in addressing the needs of States and local governments while helping keep Internet access affordable.

Mr. Chairman, I urge my colleagues on both sides of the aisle to join me in supporting this bill as the Senate has sent it back to us.

Mr. Chairman, I rise in support of H.R. 3867, the Small Business Contracting Program Improvements Act.

This bill expands procurement opportunities for small businesses owned by service-disabled veterans, women entrepreneurs, and socially disadvantaged business owners. These firms remain under-represented in the Federal contracting marketplace and have yet to receive their fair share of Federal Government contracts.

H.R. 3867 assists small businesses owned by service-disabled veterans by requiring agencies to award sole-source contracts to these firms if they are identified as being capable of performing the contracts. These businesses currently receive less than one percent of Federal Government contracting dollars. Authorizing agencies to enter into sole-source contracts with service-disabled veteran-owned firms will raise the likelihood of these firms obtaining Federal contracts. Moreover, H.R. 3867 provides an inflationary adjustment to the limitation on contracts by increasing the size of available contracts awarded without competition to $5.1 million.

This bill directs the Small Business Administration, SBA, to comply with an Executive

Order requiring the SBA to provide service-disabled veteran-owned companies with information and assistance on Federal contracting as well as assist other agencies in their strategies to expand contracting opportunities for them.

Passage of this bill is also important for our women-owned businesses. In 2000, Congress enacted the Women's Procurement Program to expand opportunities for Federal contracts to women business owners within industries in which they have been significantly under- represented. On behalf of women-owned businesses, the U.S. Women's Chamber of Commerce sued the SBA over the delay in implementing the program and won their lawsuit in 2005. Seven years after the Women's Procurement Program was enacted into law, however, the SBA has yet to establish regulations that would implement this vital program. I share Chairwoman Velazquez's frustration with this delay and her admonishment to the SBA to remedy the situation.

H.R. 3867 requires the SBA to implement the Women's Procurement Program immediately. The bill makes economically disadvantaged women entrepreneurs eligible for restricted competition contracts and gives the SBA the authority to waive this requirement in industries that are substantially under-represented by women-owned businesses. Today, women-owned small businesses capture only about 3 percent of Federal small-business contracting dollars. We need this legislation to encourage women entrepreneurs to participate in the Federal contract marketplace.

H.R. 3867 expands and modernizes the 8(a) Business Development Program, which has not been amended since 1988. The 8(a) program currently assists over 9,000 small businesses owned by socially and economically disadvantaged individuals, including about 200 firms in my State of Hawaii. H.R. 3867 makes two main improvements to this program: it provides for an inflationary increase in net worth limitations to a maximum of $550,000 for program participants and extends the duration of program participation from 9 to 10 years. Increasing the net worth ceiling will bring stronger firms into the 8(a) program.

Finally, I support this bill because it addresses contracting problems and increases oversight over unqualified businesses by setting standards that protect the integrity and consistency in application of contract assistance programs. H.R. 3867 mandates government-wide goals for procurement contracts awarded to small businesses. In addition, it requires the SBA to perform the necessary checks on program applicants and participants to confirm their business integrity and qualifications. This is important given recent findings by the SBA Inspector General of fraud and abuse in the Historically Underutilized Business Zone (HUBZone) program.

Chairwoman Velazquez has noted that the Federal Government failed to meet its small and minority business goals for a 6th year in a row, costing entrepreneurs $4.5 billion in lost opportunities. H.R. 3867 is another step in the right direction to help our small businesses, and I thank Chairwoman Velazquez for her commitment and strong leadership in sponsoring this important legislation.

I urge my colleagues to support this measure.