[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1609 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H.R. 1609

To amend title 10, United States Code, to change and clarify provisions 
  relating to the Department of Defense program for contracting with 
small disadvantaged businesses and other entities, to require potential 
   defense contractors to certify compliance with equal opportunity 
                 requirements, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 1, 1993

   Mrs. Collins of Illinois introduced the following bill; which was 
              referred to the Committee on Armed Services

_______________________________________________________________________

                                 A BILL


 
To amend title 10, United States Code, to change and clarify provisions 
  relating to the Department of Defense program for contracting with 
small disadvantaged businesses and other entities, to require potential 
   defense contractors to certify compliance with equal opportunity 
                 requirements, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Department of Defense Set Aside 
Enforcement Act of 1993''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) It has been a longstanding policy of the Federal 
        Government to assist in the development of small business 
        concerns owned and controlled by socially and economically 
        disadvantaged individuals.
            (2) This affirmative action policy is deemed necessary 
        because of the existence of historical patterns of 
        discrimination in procurement contracting that persist to this 
        day against small disadvantaged businesses owned by minority 
        individuals and against historically Black colleges and 
        universities and minority institutions.
            (3) In order to overcome these persistent patterns of 
        discrimination, which serve to perpetuate the economically 
        disadvantaged status of minority small business owners, the 
        Federal Government has created a large number of programs to 
        enable small disadvantaged business concerns to compete 
        successfully for procurement contracts let by Federal agencies.
            (4) One of the most notable of these programs was created 
        by section 1207 of the National Defense Authorization Act for 
        Fiscal Year 1987, and was recently codified as section 2323 of 
        title 10, United States Code, under the heading ``Contract goal 
        for small disadvantaged businesses and certain institutions of 
        higher education''.
            (5) Although the percentage share and dollar value of 
        contracts and subcontracts awarded to small disadvantaged 
        business concerns slowly increases each year, the percent goal 
        has never been met either in prime contracts or in 
        subcontracts, with achievements of only 3.5 percent and 2.7 
        percent, respectively, in fiscal year 1991.
            (6) The failure to achieve the goals mandated by section 
        2323 is due in part to insufficient outreach to small 
        disadvantaged businesses that are potential contractors or 
        subcontractors with the Department of Defense.
            (7) Another factor in the failure to achieve the section 
        2323 procurement goals is failure of prime contractors to make 
        adequate plans for subcontracting with small disadvantaged 
        business concerns and failure of the Department of Defense to 
        enforce compliance with those plans.
            (8) Greater commitment to the section 2323 procurement 
        goals is required both on the part of the Department of Defense 
        and on the part of defense prime contractors in order to 
        overcome the manifest deficiencies in program management and 
        implementation.

SEC. 3. REQUIREMENTS RELATING TO SMALL DISADVANTAGED BUSINESSES AND 
              OTHER ENTITIES.

    (a) 10 Percent Requirement Under Section 2323.--Section 2323 of 
title 10, United States Code, is amended as follows:
            (1) Subsection (a) is amended--
                    (A) by striking out ``Goal.--'' and inserting in 
                lieu thereof ``Requirement.--'';
                    (B) in paragraph (1), by striking out ``Except as 
                provided in subsection (d), a goal of 5 percent of the 
                amount described in subsection (b) shall be the 
                objective of the Department of Defense'' and inserting 
                in lieu thereof ``Except as provided in paragraph (4) 
                of this subsection and in subsection (d), 10 percent of 
                the amount described in subsection (b) shall be the 
                requirement of the Department of Defense''; and
                    (C) in paragraphs (2) and (3), by striking out ``5 
                percent goal'' each place it appears and inserting in 
                lieu thereof ``10 percent requirement''.
            (2) Subsection (c)(1) is amended by striking out ``goal'' 
        and inserting in lieu thereof ``requirement''.
            (3) Subsection (e) is amended--
                    (A) in paragraphs (2) and (3), by striking out ``5 
                percent goal'' each place it appears and inserting in 
                lieu thereof ``10 percent requirement''; and
                    (B) by striking out ``goal'' each place it appears 
                and inserting in lieu thereof ``requirement.
            (4) Subsections (g) and (n) (as redesignated by subsection 
        (a)) are each amended by striking out ``goal'' each place it 
        appears and inserting in lieu thereof ``requirement''.
    (b) Compliance with Contract Requirement By Use of Previously 
Eligible Entities.--Subsection (a) of section 2323 of title 10, United 
States Code, is further amended by adding at the end the following new 
paragraph:
    ``(4) During the period beginning on October 1, 1993, and ending on 
September 30, 2000, the Secretary of Defense may meet the 10 percent 
contract award requirement of this subsection during a fiscal year by 
awarding up to half of the total dollar amount of the contracts to be 
awarded during such fiscal year to any entities that meet either of the 
following criteria:
            ``(A) The entity was an entity described in subparagraph 
        (A) or (C) of paragraph (1) but is no longer such an entity, by 
        reason of size, as of the date of the issuance of the 
        solicitation for the contract concerned.
            ``(B) The entity was a small business concern eligible to 
        receive contracts pursuant to section 8(a) of the Small 
        Business Act but is no longer so eligible, by reason of size, 
        as of the date of the issuance of the solicitation for the 
        contract concerned.''.
    (c) Determination of Compliance with Contract Requirement.--(1) 
Section 2323 of title 10, United States Code, is further amended--
            (A) by redesignating subsections (i) and (j) as subsections 
        (o) and (p), respectively; and
            (B) by inserting after subsection (h) the following new 
        subsection:
    ``(i) Determination of Compliance with Contract Requirement.--For 
purposes of determining compliance with the requirement of subsection 
(a), the Secretary of Defense may include only the amounts obligated 
for prime contracts entered into by the Department of Defense with 
entities described in subparagraphs (A) through (C) of subsection 
(a)(1). The Secretary may not include amounts obligated by those or any 
other prime contractors for subcontracts entered into with such 
entities.''.
    (2) Such section 2323 is further amended--
            (A) in paragraphs (1) and (2) of subsection (a), by 
        striking out ``and subcontracts'' both places it appears;
            (B) in subsection (e)(3), by striking out ``or 
        subcontractors''; and
            (C) in subsection (f)(1), by striking out ``or 
        subcontract''.
    (d) Subcontracting Requirement and Other Provisions.--Section 2323 
of title 10, United States Code, is further amended by inserting after 
subsection (i) (as added by subsection (c)) the following new 
subsections:
    ``(j) Requirement and Plan for Subcontracting.--(1)(A) Each entity 
which enters into a contract with the Department of Defense shall, in 
carrying out the contract, spend at least 5 percent of the amount of 
the contract for subcontracts with entities described in subparagraphs 
(A) through (C) of subsection (a)(1) (hereinafter in this section 
referred to as `covered entities').
    ``(B) The Secretary of Defense may not enter into a contract with a 
potential contractor unless the potential contractor includes, with the 
contractor's subcontracting plan required by section 8(d) of the Small 
Business Act (15 U.S.C. 637(d)), a plan that provides for complying 
with the 5 percent requirement of this paragraph. Such plan shall 
include a list of the subcontracts that have been entered into 
contingent upon award of the prime contract for an amount equal to at 
least 5 percent of such total amount of the contract.
    ``(C) In calculating whether the 5 percent requirement of this 
paragraph is met, a contractor may include, in the case of a 
subcontract with a covered entity for company-wide services to the 
contractor (rather than services to the contractor related only to the 
defense contract), an amount equal to the amount of the company-wide 
services under the subcontract that are proportionately attributable to 
the services related to the defense contract.
    ``(2) The Secretary of Defense shall require each contractor to 
submit to the Department of Defense--
            ``(A) within 30 days after award of the prime contract, 
        copies of fully executed contracts between the contractor and 
        its subcontractors;
            ``(B) every 120 days after the submission under 
        subparagraph (A), information on the status of each 
        subcontract, including a notification of any intention of the 
        contractor to terminate or to replace a subcontractor; and
            ``(C) on each voucher submitted to the Department of 
        Defense, information on the payments due to be paid to each of 
        the subcontractors of the contractor, either by the contractor 
        or by the Department of Defense pursuant to subsection (k).
    ``(3) After award of a prime contract, if the contractor competes, 
through sealed bid or competitive proposal, for another contract with 
the Department of Defense, and the Secretary determines that the 
contractor has not been in compliance with the 5 percent spending 
requirement of paragraph (1), the Secretary shall not award the other 
contract to that contractor. If the contractor has not met the 5 
percent spending requirement at the end of any fiscal year during which 
the contract is in force, as evidenced by an accurate and verifiable 
accounting of the contractor's spending, the contractor shall submit to 
the Department of Defense the following:
            ``(A) The names, addresses, phone numbers, and type of 
        business of the covered entities that the contractor considered 
        or solicited as subcontractors.
            ``(B) With respect to any covered entity listed under 
        subparagraph (A) that the contractor did not enter into a 
        subcontract with, the reasons why the contractor chose not to 
        enter into a subcontract.
            ``(C) Information on how the contractor initiated contact 
        with the covered entities listed under subparagraph (A), 
        including how the entities came to the attention of the 
        contractor, such as through small disadvantaged business lists, 
        compilations, computer databases, and other references used by 
        the contractor to find small disadvantaged businesses and other 
        covered entities who are ready, willing, and able to do 
        business with that contractor.
            ``(D) A description of what the contractor plans to do in 
        the next fiscal year to bring itself into compliance with the 5 
        percent requirement for participation of small disadvantaged 
        business and other covered entities.
    ``(k) Enforcement of Plan for Subcontracting.--(1) With respect to 
each prime contract subject to the 5 percent spending requirement of 
subsection (j)(1), the Secretary of Defense shall withhold 5 percent of 
the total amount of the prime contract from the contractor. The amount 
withheld shall be used by the Department of Defense to make payments 
for work performed under the prime contract directly to subcontractors 
of the prime contractor who are entities described in subparagraphs (A) 
through (C) of subsection (a)(1). The Secretary of Defense shall 
prescribe regulations to administer this subsection not later than 180 
days after the date of the enactment of the Department of Defense Set 
Aside Enforcement Act of 1993.
    ``(2) With respect to each prime contract subject to the 5 percent 
spending requirement of subsection (j)(1), the Secretary of Defense may 
not pay any amount for a price adjustment of the contract unless the 
contractor is in compliance with the spending requirement.
    ``(3) The administration of subsection (j) by a contracting officer 
shall be a factor in the evaluation of the performance of the 
contracting officer.
    ``(l) Composition of Labor Force.--(1)(A) Except as provided in 
paragraph (2), with respect to any contract to be entered into by the 
Department of Defense for purposes of meeting the requirement of 
subsection (a) of this section, an entity described in subparagraph 
(A), (B), or (C) of subsection (a)(1) may not be awarded a contract for 
such purposes unless the entity agrees that--
            ``(i) in the case of a contract for services (except 
        construction), at least 50 percent of the cost of contract 
        performance incurred for personnel shall be expended for 
        employees of the entity; and
            ``(ii) in the case of a contract for procurement of 
        supplies (other than procurement from a regular dealer in such 
        supplies), the entity will perform work for at least 50 percent 
        of the cost of manufacturing the supplies (not including the 
        cost of materials).
    ``(B) The Secretary of Defense may decrease, by not more than 10 
percent, the percentage under clause (i) or (ii) of subparagraph (A) if 
the Secretary determines that such change is necessary to reflect 
conventional industry practices among business concerns that are below 
the numerical size standard for businesses in that industry category.
    ``(C) The Secretary of Defense shall prescribe regulations similar 
to those specified in subparagraph (A) to be applicable to contracts 
for general and specialty construction and to contracts for any other 
industry category not otherwise subject to the requirements of such 
subparagraph. The percentage applicable to any such requirement shall 
be determined in accordance with subparagraph (B).
    ``(2) In lieu of meeting the requirements of paragraph (1) for any 
contract to be entered into by the Department of Defense for purposes 
of meeting the requirement of subsection (a), an entity described in 
subparagraph (A), (B), or (C) of subsection (a)(1) may agree that--
            ``(A) in the case of a contract for services (except 
        construction), at least 75 percent of the cost of contract 
        performance incurred for personnel shall be expended for 
        employees of the entity or of other entities described in 
        subparagraph (A), (B), or (C) of subsection (a)(1); and
            ``(B) in the case of a contract for procurement of supplies 
        (other than procurement from a regular dealer in such 
        supplies), the entity or other entities described in 
        subparagraph (A), (B), or (C) of subsection (a)(1) will perform 
        work for at least 75 percent of the cost of manufacturing the 
        supplies (not including the cost of materials).
    ``(m) Rule Relating to Non-Manufacturers.--(1) With respect to any 
contract to be entered into by the Department of Defense for purposes 
of meeting the requirement of subsection (a), an otherwise responsible 
business concern that is in compliance with the requirements of 
paragraph (2) shall not be denied the opportunity to submit and have 
considered its offer for a procurement contract for the supply of a 
product for purposes of meeting the requirement of subsection (a) 
solely because such concern is other than the actual manufacturer or 
processor of the product to be supplied under the contract.
    ``(2) To be in compliance with the requirements referred to in 
paragraph (1), such a business concern shall--
            ``(A) be primarily engaged in the wholesale or retail 
        trade;
            ``(B) be a small business concern under the numerical size 
        standard for the Standard Industrial Classification Code 
        assigned to the contract solicitation on which the offer is 
        being made;
            ``(C) be a regular dealer, as defined pursuant to section 
        1(a) of the Act of June 30, 1936 (41 U.S.C. 35(a); popularly 
        referred to as the Walsh-Healey Public Contracts Act), in the 
        product to be offered the Department of Defense; and
            ``(D) represent that it will supply the product of a 
        domestic small business manufacturer or processor, unless a 
        waiver of such requirement is granted--
                    ``(i) by the Secretary of Defense, after reviewing 
                a determination by the contracting officer that no 
                small business manufacturer or processor can reasonably 
                be expected to offer a product meeting the 
                specifications (including period for performance) 
                required of an offeror by the solicitation; or
                    ``(ii) by the Secretary of Defense for a product 
                (or class of products), after determining that no small 
                business manufacturer or processor is available to 
                participate in the Federal procurement market.
    ``(n) Definition.--In this section, the term `covered entity' means 
an entity described in subparagraph (A), (B), or (C) of subsection 
(a)(1).''.
    (e) Small Business Contract Awards.--Subsection (e)(5)(E) of 
section 2323 of title 10, United States Code, is amended by adding at 
the end the following: ``Such efforts may include dividing up contracts 
for large dollar amounts into contracts for smaller dollar amounts.''.
    (f) Outreach.--The Secretary of Defense, acting through the Defense 
Contract Administration Services regions, shall increase outreach, 
through a variety of methods, to small disadvantaged businesses that 
are potential contractors or subcontractors with the Department of 
Defense. The methods for increasing outreach shall include the 
following:
            (1) Contacting minority nonprofit organizations and 
        national and local business organizations that represent 
        minority and small disadvantaged businesses, to inform them, 
        through briefings, printed listings, and other means, about 
        opportunities for small disadvantaged businesses to do business 
        with the Department of Defense.
            (2) Directly contacting small disadvantaged businesses that 
        might be ready, willing, and able to contract or subcontract 
        with the Department of Defense. The businesses to be contacted 
        could be found through means such as compilations of small 
        disadvantaged businesses, computer databases with indices of 
        such businesses, and small disadvantaged business offices of 
        each State and municipality in which a contract with the 
        Department of Defense is entered into or performed.

SEC. 4. PRE-BID COMPLIANCE WITH EQUAL EMPLOYMENT OPPORTUNITY 
              REQUIREMENTS.

    (a) In General.--The Secretary of Defense shall require, as a 
condition for approval of a contract with the Department of Defense, 
that the potential contractor provide documentation along with the bid 
for the contract certifying that the potential contractor is in 
compliance with the equal opportunity clause in section 60-1.3 of title 
41, Code of Federal Regulations (as in effect on March 8, 1990).
    (b) Certification.--Certification required under this section shall 
be conducted by an independent auditor meeting criteria approved under 
regulations promulgated by the Director of the Office of Federal 
Contract Compliance Programs (hereinafter in this section referred to 
as the ``Director'') within 90 days after the date of the enactment of 
this Act. Such certification shall include the results of on-site 
inspection by the auditor to determine the requisite compliance and 
otherwise shall be in such form and contain such information as the 
Director may require.
    (c) Cost of Audit.--Each bid shall include the cost of the audit 
required under this section under the projected costs of the contract.
    (d) Subcontractor Compliance.--Each potential contractor shall 
require its subcontractors to provide self-certified compliance reports 
as described in subsection (b) to the potential contractor. The 
potential contractor shall include such compliance reports with its 
bid.
    (e) Certification Updates.--At the end of each 12-month period 
during the term of any contract, an update review of the contractor's 
compliance during such period shall be conducted by an independent 
auditor meeting criteria approved under regulations promulgated by the 
Director. Such update review may or may not be as comprehensive as the 
original certification audit described in subsection (b).
    (f) Enforcement.--Enforcement of this section shall be in 
accordance with subpart B of part 60-1 of title 41, Code of Federal 
Regulations (as in effect on March 8, 1990), except that in no case may 
a contractor or subcontractor be barred from award of a contract by 
reason of non-compliance with this section for a period exceeding four 
years.
    (g) Effective Date.--This section shall apply with respect to any 
contract entered into with the Department of Defense after the 60-day 
period beginning on the date of promulgation of regulations under 
subsection (b).
    (h) Regulations.--Not later than 180 days after the date of the 
enactment of this Act, the Secretary of Defense shall promulgate 
regulations to administer this section.

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HR 1609 IH----2