Small Business Fairness in Contracting Act

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

Mr. Chairman, there is no question that the Federal marketplace continues to grow at record rates. Just last year, the Federal Government spent $417 billion on goods and services. While the government's buying power is increasing, small businesses' opportunities and access to this market is decreasing. With unfair competition and the combining of government projects, entrepreneurs are being shut out of the Federal market. Currently, the state of procurement for small businesses is one that does more to create barriers than it does to encourage participation.

What we have heard time and time again is that access to government projects is out of the reach of small firms. The barriers in the way of accessing this work is clear, among them, the bundling of contracts, the lack of a strongly enforced small business contracting goal and large firms receiving contracts intended for small firms.

For the past 6 years, the government has failed to meet its 23 percent small business contracting goal, costing entrepreneurs last year alone as much as $4.5 billion in lost contracting opportunities. With small businesses creating three out of every four new jobs in this country, they deserve to compete on a level playing field for government work. Small firms do not deserve to be left out of the Federal marketplace but, instead, to be given every tool needed to continue to spur economic growth.

The number one reason the small business contracting goal is not being met is because of the bundling of contracts. Individual contracts being combined works to exclude small firms from bidding on them and often results in higher costs to taxpayers and decreased value for the government. For every $1,800 awarded in a bundled contract, there is a $33 decrease to small businesses. When contracts are bundled together creating ``super-contracts,'' they become too large for entrepreneurs to compete.

In 2002, the President pledged during the administration's announcement of their small business agenda that, ``We're going to insist we break down large Federal contracts so that small business owners have got a fair shot at Federal contracting.'' This legislation finally puts his words into action.

To create the illusion that the goal is being met, agencies are using contracts awarded to large companies and including them toward their small business contracting goal. In 2005, approximately $12 billion in contracts were falsely counted. This gives the impression that agencies are doing more work with small firms than they actually are.

Access to the Federal marketplace is an important mechanism for growth for small businesses. If competition for government projects is not fair, there is no way we can expect entrepreneurs to grow and expand their ventures. This not only benefits entrepreneurs, but also puts taxpayers' dollars to good use. For every dollar in contracts, $7 in revenue is generated for the Federal Government.

Clearly, large businesses have more resources than small firms. Oftentimes they have access to more capital, can hire more staff and have fewer barriers in the way of marketing and expanding their companies. The last thing they need to be doing is taking contracts intended for small businesses.

H.R. 1873 is a bipartisan effort introduced by Mr. Braley. I want to commend Mr. Braley for his work on addressing small business procurement issues and bringing this bill up for consideration.

This legislation will help open the marketplace for small business contracts. It ensures that fair competition is enforced and that small firms are given the opportunities they deserve to work with the Federal Government.

With the government being the largest buyer of services and goods and small businesses being the largest job creators, increased partnership between these two is the best value for the taxpayer dollar, and not only benefits entrepreneurs, but communities all across the country.

I strongly urge my colleagues to vote for the Small Business Fairness in Contracting Act.

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

Mr. Chairman, I yield to the gentleman from California (Mr. Waxman), chairman of the Committee on Oversight and Government Reform, such time as he may consume; and I want to take this opportunity to thank him for his work on this legislation.

Mr. Chairman, I yield such time as he may consume to the gentleman from Iowa (Mr. Braley), the sponsor of the bill and the chairman of the Contracting and Technology Subcommittee of the Small Business Committee.

Mr. Chairman, I would like to close by saying that it has been over a decade since a small business contracting bill has come to the floor. Clearly, addressing the concerns of entrepreneurs in regards to procurement is long overdue and much needed.

I just want to take this opportunity to thank Ranking Member Chabot for all of his hard work and his collaboration in working on this legislation. I also want to thank Mr. Braley and to take this opportunity to thank the staff that worked on this bill.

From the minority staff, Barry Pineles; from Mr. Braley's staff, Tom Wolf and Mike Goodman; from Mr. Waxman's staff, Mark Stevens and Phil Barnett; and from the majority staff, LeAnn Delaney and Melody Reis and Russ Orban.

I strongly urge my colleagues to vote for the Small Business Fairness in Contracting Act

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

Mr. Chairman, contract bundling has been a major issue for years, and it is increasing. When contracts are combined together into mega-contracts, small businesses are unable to compete. In fact, some contracts are so large that only a handful of companies would be able to perform them. This can create a virtual monopoly, which is problematic for taxpayers concerned with getting the best value for their money.

This amendment would save taxpayers money and benefit the economy. It will increase competition, providing the government with more options to purchase goods and services from. This will ultimately lower prices for Federal agencies. Unbundling contracts will create new opportunities for entrepreneurs, leading to new jobs and more local tax revenue.

The amendment closes a loophole in current law. This amendment adds new work and construction, which previously were not subject to bundling analyses. Current law only required contracts that have been previously performed to be reviewed for bundling. This amendment closes this gap and gives Federal agencies the tools it needs to save the taxpayers money.

The expanded bundling definition will not be overly burdensome. Contracts that are not suitable for small businesses will not require a bundling analysis. Bundled construction contracts under $65 million will not require an analysis. By creating more competition in the Federal marketplace, this amendment will save taxpayers money.

Expanding the definition of bundling will require more contracts to be reviewed, and possibly unbundled, than the current statute permits. This will create more opportunities for small firms, give the government more options and lower costs and increase quality for taxpayers.

I thank both the gentleman from Pennsylvania for his work on this issue and Mr. Chabot for all the work that he has done on the underlying bill and on this amendment.

Mr. Chairman, I demand a recorded vote.

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

Mr. Chairman, we are prepared to accept this amendment.

One of the areas in which small businesses could participate much more than they currently are is in the area of subcontracting. Subcontracting provides a great entry point to the Federal marketplace for small businesses.

The gentleman's amendment would expand the amount of information collected on subcontracting in the government-wide database. It also reinforces the notion that when prime contractors don't achieve their small business goals these should be reflected in their evaluation for subsequent contracts.

I am pleased to support the gentleman's amendment, and I thank the gentleman from Texas for his work on this legislation.

I ask adoption of this amendment.

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

Mr. Chairman, it is important that the small business goals apply to contracts performed overseas. For too long there has been an exclusive club of contractors for overseas work. This needs to change. Extending the small business goals to apply to these contracts will expand the pool of contractors available to the government. This amendment will help bring overseas opportunity to small businesses.

A recent study of $6 billion in overseas contracts showed only $122 million was awarded to small businesses, just 2 percent. This amendment gives agencies an incentive to award overseas contracts to small businesses. Agencies that do use small businesses for overseas contracts will now be able to get credit.

The Federal Government should be looking to small businesses for overseas work. Ninety-seven percent of all exporters are small businesses; 30 percent of all goods made for export are made by small businesses. Technological improvements give small businesses much greater access to worldwide markets than in the past.

It is important to help small businesses gain access to overseas contracting opportunities they have been locked out of. This amendment will accomplish this by helping encourage agencies to look to American small businesses for this work.

I thank both gentlemen, Mr. Shuler and Mr. Chabot, for their work on this legislation. I urge adoption of this amendment.

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

Mr. Chairman, since 1977, the minimum goal for small businesses in the Federal marketplace has been 23 percent of the total value of goods and services acquired. Each year, the administration boasts of how it almost made its target. Unfortunately, in 2005 alone, at least $12 billion, almost 15 percent of the small business accomplishments, as reported by the Small Business Administration, were actually awarded to large businesses. Agencies have become so single- minded about achieving the minimum goal that they have lost sight of the intent.

The goal is a measurement of commitment to small businesses; and when the goal isn't achieved, small businesses pay the price. Because the minimum has not been met over the past 6 years, small businesses have lost almost $10 billion in contracting opportunities. This represents nearly 200,000 jobs that could have been created across the country.

Many people have asked me, if the small business contracting goal hasn't been met, why do you support increasing it? As I said, the goal is simply a measurement. There are no penalties to an agency for not achieving it.

It is already the policy of the United States, as set forth in the statute, that small firms shall have the maximum practical opportunity to participate in the performance of contracts let by any Federal agency.

It doesn't say minimum; it says maximum. This is why the Bean-Chabot amendment is so important. It gets us away from the small business goal as ceiling mentality. It ensures that small business participation is maximized, not minimized.

I congratulate Ms. Bean and Mr. Chabot for this amendment. It was included when the Committee on Small Business unanimously reported this legislation, and I was disheartened to see that it was diluted as the bill progressed. I am pleased to support this amendment, and I look forward to working with my colleagues to ensure that this amendment creates new opportunity for small businesses in the Federal marketplace. I thank Ms. Bean and Mr. Chabot on their work on this amendment, and I urge adoption of this amendment.

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

Mr. Chairman, we accept this amendment by Mr. Welch, which proposes a 5 percent goal for Federal contracting with green small businesses. I look forward to working with my colleague on this amendment, which encourages the government to reward small businesses that meet higher environmental standards.

I thank the gentleman from Vermont for his work on this legislation, and I urge adoption of the amendment.

Mr. Chairman, I yield to the ranking member, Mr. Chabot, for any comments that he might have.

Mr. Chairman, I thank the gentleman for yielding.

We are prepared to accept this amendment. Many times the proposed solution to a problem, particularly in the Federal procurement environment, is the assessment of penalties. Sometimes this works. Sometimes it doesn't. I have found that when it works best, it is also accompanied by incentives for good performance.

The gentleman from Maryland begins this process. It is a worthy endeavor, and I am pleased to support the gentleman's amendment. I want to thank him for the work that he is doing on this legislation, and I urge adoption of the amendment.

I thank the gentlelady for yielding.

We accept this amendment which will require the Administrator of SBA to make public the actions taken on behalf of small businesses or trade associations with regard to bundled contracts. More importantly, it will publicize the results of their actions.

I look forward to working with my colleague on this amendment which will add transparency to the bundling appeals process.

I, again, want to thank the gentlewoman from Texas for her work. I urge adoption of the amendment, and I yield to Ranking Member Chabot.

Mr. Chairman, I want to thank the gentlelady for yielding.

We are prepared to accept this amendment. The gentlelady's amendment provides a measure of enforcement. It requires agencies to send copies of letters in which they have disagreed with the SBA's attempts to maximize the usage of small businesses on bundled contracts to the relevant authorizing committee.

The committees will soon become familiar with the extent to which agencies within their jurisdiction are bundling contracts and will have a better handle on the extent of this problem.

I urge adoption of this amendment, and I yield to the ranking member, Mr. Chabot.

Mr. Chairman, I move that the Committee do now rise.

Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 383 and ask for its immediate consideration.

Mr. Speaker, for the purpose of debate only, I yield the customary 30 minutes to the gentleman from Florida (Mr. Lincoln Diaz- Balart). All time yielded during consideration of the rule is for debate only.

General Leave

Mr. Speaker, I ask unanimous consent that Members may have 5 legislative days within which to revise and extend their remarks on H. Res. 383.

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

Mr. Speaker, House Resolution 383 provides for consideration of H.R. 1873, the Small Business Fairness in Contracting Act, under a structured rule. The rule provides 1 hour of general debate equally divided and controlled by the chairman and ranking member of the Committee on Small Business. The rule makes in order the substitute reported by the Committee on Oversight and Government Reform as original text for the purpose of amendment. The substitute shall be considered as read.

The rule waives all points of order against consideration of the bill except for clauses 9 and 10 of rule XXI. The rule makes in order eight amendments that were submitted for consideration that are printed in the Rules Committee report on this accompanying resolution.

Finally, the rule provides one motion to recommit with or without instructions.

Mr. Speaker, the Small Business Fairness in Contracting Act, H.R. 1873, amends key sections of the Small Business Act to assist small businesses in participation in Federal procurement.

The predecessors to the Small Business Administration can be traced back to World War II and efforts by President Roosevelt and President Truman. In fact, during World War II, it was found to be in our national interest to ensure a strong and diverse industrial base.

Through a series of laws and procurement requirements, Congress established a benchmark to give small business every opportunity to compete fairly for the awarding of Federal contracts. Despite this clear mandate in existence for more than 50 years, small businesses, however, have not received their fair share of Federal Government contracts.

For example, in 2006, the Federal Government spent over $417 billion on goods and services in 8.3 million separate contract actions. Small businesses won approximately $80 billion in contracts, approximately 21.5 percent of these contracts. This was the sixth straight year that the government has failed to meet its 23 percent small business contracting goal. This cost entrepreneurs an estimated $4.5 billion in lost contracting opportunities last year alone.

Small businesses suffered this massive loss, despite their importance to our national economy. Small businesses are the engine of our economy. In fact, they are responsible for creating three out of every four jobs in the United States. We cannot afford our budding entrepreneurs to be shut out of what would be an open market and be denied the opportunity to succeed. Not when their existence is so vital to our national economy.

We should not be shutting them out. Instead, we should be opening doors and shepherding their growth to ensure continued prosperity.

There are many reasons for the failure to break the stranglehold on Federal contracting process. In response, H.R. 1873 takes several necessary steps to address some key causes. H.R. 1873 seeks to break down the barriers for countless entrepreneurs and small businesses that are on the road to opportunity.

First, the bill bans contract bundling. Past practice has been to combine two or more smaller contracts into a single, larger package. While this bundling may be administratively convenient, it reduces competition and opportunity for small businesses.

Bundling squeezes small businesses out of the contract competition, benefiting larger, full-scale businesses in the process; and when there is less competition, there is also higher cost on the taxpayer.

To add insult to injury, Federal agencies are skewing the data with respect to small businesses. To give the impression that 23 percent of small business contracting goals are being met, agencies are using contracts awarded to larger companies and including them towards their small business contracting goals. H.R. 1873 seeks to reverse these trends and make it easier for small businesses to compete in the Federal marketplace.

Second, the bill makes an appeals process more accessible. Under current law, small businesses are only allowed to protest the award of a contract if they are directly harmed by it, but they are unlikely to do so given the costs involved in the process. Under the bill, small businesses and trade associations acting on their behalf that are adversely affected, directly or indirectly, by a proposed procurement can now request that the SBA appeal the procurement on their behalf.

H.R. 1873 increases the procurement goals for small businesses. It increases the government-wide goal for the number of contracts awarded to small businesses from 23 to 25 percent, a goal which has not been raised in over 10 years. It also increases from 5 percent to 8 percent the government-wide contracting goals for both disadvantaged and women- owned small businesses.

The bill raises the threshold for small business contract set-asides to the simplified acquisition threshold. It also requires that an independent audit of the Central Contracting Registry be conducted on a biannual basis to ensure that large firms are not misrepresenting themselves as small businesses.

Mr. Speaker, the opportunity for open competition for Federal contracts is immensely important to small businesses. This bill has strong bipartisan support. It passed the Small Business Committee by a voice vote, and it was sequentially referred to the Committee on Oversight and Government Reform where it also passed by a voice vote.

I would like to thank both committees for their hard and thoughtful work in bringing this legislation to the floor today. In particular, I extend my thanks to Chairwoman Velazquez, the subcommittee chairman, Mr. Braley, and Chairman Waxman.

Mr. Speaker, we all recognize the importance of small businesses to our economy, and we must act on this bill without further delay.

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

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

I would just like to respond to the gentleman and my good friend from Florida who serves with me on the Rules Committee. I would like to remind him that while it is true that no Republican amendments by themselves were in order, there certainly was made in order Ranking Member Mr. Chabot's suggested return of amendments the way it was in the Small Business Committee. He paired with Congresswoman Bean of Illinois, with Congressman Shuler of North Carolina and with Mr. Sestak of Pennsylvania in coauthoring three amendments that were, in fact, made in order.

So to say that no Republican suggestions were made in order was simply not totally accurate. In fact, Mr. Speaker, three Democratic amendments and four Republican amendments were not made in order, but a significant number of them are going to be considered today.

We believe that this is, in fact, a very good use of the time of the Members of this House. The Committee on Government Reform is the watchdog committee for this House. They had some issues that they wanted to clarify in the legislation, and I think that the Rules Committee felt that their suggestions had merit in at least two cases.

I also want to make the point, Mr. Speaker, that this legislation is supported by the NFIB, the National Federation of Independent Business; the Women's Chamber of Commerce; the Hispanic Chamber of Commerce; the Women Impacting Public Policy; the National Small Business Association; and the Associated General Contractors of America.

Mr. Speaker, I have one additional speaker who requests some time who is not yet here, and so I reserve my time.

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

Mr. Speaker, in the last Congress, in both sessions, the Rules Committee reported a grand total of three open rules that were not appropriation rules. Two of them were open rules with a preprinting requirement. In this session, the new majority, we have already done seven open rules, six with preprinting requirements. And that is just in over 4 months.

Say what you want, we have already had a fairer and far more open process than happened in just the last 2 years of the prior majority's rule, when their party ran this place.

Mr. Speaker, Mr. Price from Georgia indicated that he has proposed a rule to get our fiscal house in order, an amendment that would do that. Yet, he has offered that same amendment several times in other pieces of legislation. Every time when it was allowed and came to the floor, his amendment failed.

Further, I would like to just mention the fact that the current majority has, in fact, instigated PAYGO rules in the House of Representatives, and so we have made that the law of the House. We, in fact, are bringing fiscal responsibility to this House on a daily basis, something that the prior party in charge was not able to do over 14 years while they were in charge. In fact, the deficit went up at an astounding rate while they were in control of this institution, and it has been the Democrats who have come back to power and are instigating PAYGO rules and fiscal responsibility in the House of Congress.

I yield to the gentleman from Georgia for a question.

Mr. Speaker, I reclaim my time. The point of my claim was the gentleman's amendment had failed because we have already instituted the PAYGO rules in our rules of the House of Representatives, and we do that on a daily basis.

When the gentleman's party was in power for a number of years, we saw the largest deficit increases in the history of our country, more foreign debt that they piled on to our Nation, and in fact, we are reversing the course that they set out in their prior control of Congress.

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

Mr. Speaker, I would just like to respond to my good friend from Texas and state the committee considered his amendment, proposed amendment, and rejected it for a large reason, because we feel that it is important to make companies certify that they are, in fact, small businesses, that there have been mistakes made in the past, that companies have gotten beyond the threshold and have won contracts that they may not be authorized to do.

Just because the Small Business Administration periodically will go and check that, we don't believe that that is enough of a cause to require that other small businesses be shut out of the process because companies that grow beyond the requirements are allowed special treatment.

Mr. Speaker, I reserve the balance of my time for my close.

Mr. Speaker, in my close, I just want to assure the Members of Congress that we are, in fact, running the most open process in this Congress, that, in fact, we have provided seven open rules.

Now those rules may have a pre-printing requirement, as Mr. Diaz- Balart mentioned, the gentleman from Florida. In fact, though, requiring a pre-printing requirement allows every Member who desires to put forward an idea to come and have their ideas presented to the House. That is much more than what happened in the prior Congress, when they were in charge. We are keeping our commitment to running an open process.

As I mentioned, this legislation is very worthy of this rule and of passage. As I mentioned, small businesses have not received their fair share of Federal Government contracts, despite their importance to our economy. The bill before us today, H.R. 1873, addresses some of the key causes.

By making a few targeted reforms to the procurement process, we can help thousands of small businesses and give a much-needed jolt to our national economy. We must continue to shepherd our small businesses to give them every opportunity to succeed for today and for tomorrows yet to come. This bill will move us in that direction, and a small business will be that much closer to making their dreams of prosperity a reality.

I urge a ``yes'' vote on the rule and on the previous question

Mr. Speaker, I yield back the balance of my time, and I move the previous question on the resolution.

The previous question was ordered.

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

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

Mr. Chairman, tonight I rise in support of H.R. 1873, the Small Business Fairness in Contracting Act. As an original cosponsor of this legislation, we worked closely with Chairwoman Velazquez and Representative Braley to draft a good, bipartisan bill that passed the Small Business Committee by voice vote and was cosponsored by nearly all the members of the committee.

Our legislation was intended to reform the contracting process, increase competition and provide a better value to the taxpayer. The legislation also takes steps to provide greater opportunities to small businesses and addresses problems with the Federal procurement database.

Promoting competition and increasing suppliers depends on the active participation of small businesses, the fastest growing segment of the American economy.

Without small business's participation, the government is forced to rely on fewer and fewer businesses to satisfy its need for goods and services. This concentration is bad for the government and worse for the tax-paying public. For that reason, utilization of small businesses to fulfill government contracts has been a long-standing policy, a policy that is neither Republican nor Democrat.

Unfortunately, the bill we are considering today, while making many important reforms, is watered down from the original version we introduced.

I commend Chairman Velazquez and her staff for working tirelessly to try and protect the sound work done by the Committee on Small Business.

I also want to thank the Rules Committee, and especially Chairwoman Slaughter and Ranking Member Dreier, for allowing me to offer three important amendments, along with three of my Democratic colleagues, to restore significant provisions of the original bill.

One amendment that I proposed with Mr. Sestak, however, was not ruled in order. This amendment would have restored a provision of our original Small Business Committee bill related to contract bundling. Contract bundling is a procurement strategy that represents a potential obstacle to small business participation in the Federal marketplace. Contract bundling allows Federal procurement officials to manage the procurement process using fewer contracts. At times, contract bundling may be appropriate. At other times, it may reduce competition by combining multiple contracts for goods or services that could be provided separately into a single contract that small businesses are incapable of performing.

Nothing in our original bill as reported by the Committee on Small Business would have completely prevented the Federal Government from bundling contracts, nor is there anything in the bill that we are debating

today that prevents contracts from being bundled. Instead, we take the view that bundling can be beneficial if the government gets substantial, measurable benefits in terms of better prices or higher quality or critical delivery terms.

However, our original bill would have required that Federal contracting officers examine their contracting strategies to ensure that the government was receiving real benefits through bundled contracts and also consider the potential loss of competition from small businesses being excluded. Or as President Reagan might have put it, trust but verify.

The bill we are debating now reduces the amount of contracts subject to the trust but verify standard as compared to our original bill. It does, however, represent an increase from current law in the number of contracts that will be scrutinized. With that in mind and with the amendments made in order, including a separate amendment by Mr. Sestak, the bill moves us modestly in the right direction.

I would hope that as we proceed, and especially in conference, we continue to strengthen the trust but verify standards relative to bundled contracts.

While this may create more work for Federal contracting officers, it also ensures that the Federal procurement process protects competition in the long run while ensuring that the government benefits in the short run from necessary bundled contracts.

As we work through the legislative process with the Senate, it is important that a sensible mechanism exist for an independent arbiter to resolve disputes between the SBA and the agency issuing a bundled contract. It seems unfair that the SBA's only avenue of appeal is to the agency that is doing the procurement. Would anybody be surprised to learn that the administrator has never won an appeal on an agency head on a disputed bundled contract? Not once.

Nor should the legislation as it works its way to final passage substitute an appeals process by affected small businesses for that of the Small Business Administrator. Requiring a small business to challenge an agency's decision pits a David against a Goliath. But, unlike the biblical account, Goliath usually win these battles.

In addition to the provisions on bundling, the bill we are considering today increases the goals for prime Federal contracts to small businesses. But in my estimation and why I offered amendments is that the increase in the bill does not recognize the 10 percent growth in the number of small businesses since 1997, the last time the goals were raised. Nor does the modest increase from 23 to 25 percent recognize substantial technological changes and the capacity of small businesses to perform contracts overseas. Amendments we will be considering will raise those standards to appropriate levels and recognize the capacity of small businesses to perform work overseas.

In addition, I would ask the chairwoman that we work together to remove a provision included in the bill by the Committee on Oversight and Government Reform that treads on the sole jurisdiction of the Committee on Small Business. I believe that sets a bad precedent for future legislation in the House.

I also find that the provisions in title III of the bill are worthy of support. I congratulate the Committee on Oversight and Government Reform as well as members of the Committee on Small Business on working to eradicate errors in critical Federal procurement databases. These changes, although seemingly arcane, will ensure that contracting officers award contracts intended to small businesses to actual small businesses.

While this bill is not as strong as the version adopted by the Small Business Committee, it nevertheless represents an improvement over existing law. I will continue to work to further strengthen this bill and to ensure that small businesses have their fair opportunity to participate in the Federal procurement process

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

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

Mr. Chairman, we have no further speakers, and I yield back the balance of my time.

Mr. Chairman, I claim the 5 minutes in opposition to the amendment, although I do not oppose the amendment. I am in favor of it.

Mr. Chairman, I yield such time as she might consume to the gentlewoman from New York (Ms. Velazquez), if she would like to speak at this time.

Mr. Chairman, I yield myself as much time as I may consume. I will be brief.

The amendment offered by Mr. Sestak will increase the protections against inappropriate contract bundling. It represents a compromise between the Small Business Committee's version and the Committee on Government Reform's version of H.R. 1873. I believe it represents an adequate resolution of the issue and pledge to work to make the protections in the Sestak amendment even stronger as we work through the legislative process.

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

I yield back the balance of our time.

Mr. Chairman, we accept the amendment. We have no objection.

I want to thank the gentleman for his hard work on this particular amendment. I think it's a good amendment. I would urge its passage.

The amendment expands the pool of contracts included in the Federal governmentwide goal for participation of small business concerns and procurement contracts to include United States small business concern contracts performed overseas. Current law and regulations apply the small business concern Federal governmentwide goal only to contracts performed in the United States.

The bill as currently written would continue to apply the small business concern Federal governmentwide goal to contracts performed only in the United States. This methodology clearly does not address small business concerns involvement in today's global economy. When small business policy was first developed in the 1940 to 1950 timeframe, small business concern participation in the overseas markets was fairly limited.

In today's global economy, adding contracts where United States small business concerns perform overseas work is reasonable because the availability of the Internet and advances in technology allows contracting officers to acquire information on such activities.

Therefore, United States small business concerns global activity should be recognized and, thus, included as a part of the overall Federal governmentwide small business concern goal.

Again, I want to thank the chairwoman and I want to thank Mr. Shuler for their work on this particular amendment

I thank the gentlewoman for yielding, and I thank her for her leadership on this amendment and her hard work, as well as the chairwoman's.

This is a simple amendment. The amendment increases the Federal government-wide goal for participation of small business concerns in procurement contracts from 23 percent to 30 percent. The bill, as currently written, would increase the Federal government-wide goal from 23 percent to 25 percent, which is only a 2 percent increase, which is really pretty miserable when one considers it. It ought to be, I think, significantly more than that, especially when you consider that the Federal market for goods and services has doubled in the past 10 years, and the number of small businesses has increased by 10 percent during that period of time.

So to maintain the congressional standard in the Small Business Act that a fair share Federal government procurement contracts are awarded the small business concerns, this amendment increases the goal a modest 8 percent, which is, quite frankly, long overdue.

Finally, the goal increase recognizes small business concern's role in the economy. Small businesses employ more than 50 percent of all employees in the United States, and this would cause increased competition, resulting in a downward pressure on pricing, which ultimately benefits the taxpayer. Small businesses are the main contributors to major technological paradigm breakthroughs, as opposed to simply advancing the current knowledge in a specific technological field.

I think this is a very good amendment. I, again, want to thank the gentlelady for offering it.

I thank the gentlelady. We have no objection and support the amendment, and thank the gentleman for offering it.

Mr. Chairman, we accept the amendment, and we thank the gentleman from Maryland for his leadership on this as he has shown such great leadership on so many other issues as well.

I thank the chairwoman for yielding.

I want to thank the gentlelady from Texas for offering this very helpful amendment. We've looked over it, and we think it's a very good amendment. I've had the pleasure to serve on the Judiciary Committee with the gentlelady for the past 13 years. I've agreed with some amendments. Unfortunately, oftentimes, I've disagreed with her amendments. But it's very nice to be able to agree with one that the gentlelady has offered. So we thank the gentlelady for offering it.

I thank the gentlelady for yielding, and I want to again commend the gentlewoman for offering a helpful amendment. And we accept this amendment as well.

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, 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.