[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3893 Reported in House (RH)]

                                                 Union Calendar No. 534
112th CONGRESS
  2d Session
                                H. R. 3893

                      [Report No. 112-731, Part I]

  To amend the Small Business Act with respect to subcontracting and 
                  insourcing, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 2, 2012

 Mr. Mulvaney introduced the following bill; which was referred to the 
   Committee on Small Business, and in addition to the Committee on 
   Oversight and Government Reform, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

                           December 27, 2012

Additional sponsors: Mr. Hanna, Mr. Walsh of Illinois, Mr. Chabot, Mr. 
Graves of Missouri, Mr. West, Mr. Schilling, Mr. Tipton, Mrs. Ellmers, 
                            and Mr. Kingston

                           December 27, 2012

    Reported from the Committee on Small Business with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                           December 27, 2012

The Committee on Oversight and Government Reform discharged; committed 
   to the Committee of the Whole House on the State of the Union and 
                         ordered to be printed
    [For text of introduced bill, see copy of bill as introduced on 
                           February 2, 2012]


_______________________________________________________________________

                                 A BILL


 
  To amend the Small Business Act with respect to subcontracting and 
                  insourcing, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Subcontracting 
Transparency and Reliability Act of 2012''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.

                 TITLE I--LIMITATIONS ON SUBCONTRACTING

Sec. 101. Limitations on subcontracting.
Sec. 102. Penalties.
Sec. 103. Conforming amendments.
Sec. 104. Guidance.

                     TITLE II--SUBCONTRACTING PLANS

Sec. 201. Subcontracting plans.
Sec. 202. Notices of subcontracting opportunities.

                         TITLE III--INSOURCING

Sec. 301. Definitions relating to procurement protest system.
Sec. 302. Insourcing.

                 TITLE I--LIMITATIONS ON SUBCONTRACTING

SEC. 101. LIMITATIONS ON SUBCONTRACTING.

    The Small Business Act (15 U.S.C. 631 et seq.) is amended--
            (1) by redesignating section 45 as section 47; and
            (2) by inserting after section 44 the following:

``SEC. 45. LIMITATIONS ON SUBCONTRACTING.

    ``(a) In General.--If awarded a contract under section 8(a), 8(m), 
15(a), 31, or 36, a covered small business concern--
            ``(1) in the case of a contract for services, may not 
        expend on subcontractors more than 50 percent of the amount 
        paid to the concern under the contract;
            ``(2) in the case of a contract for supplies (other than 
        from a regular dealer in such supplies), may not expend on 
        subcontractors more than 50 percent of the amount, less the 
        cost of materials, paid to the concern under the contract;
            ``(3) in the case of a contract described in more than 1 of 
        paragraphs (1) through (4)--
                    ``(A) shall determine for which category of 
                services or supplies, described in 1 of paragraphs (1) 
                through (4), the greatest percentage of the contract 
                amount is awarded;
                    ``(B) shall determine the amount awarded under the 
                contract for that category of services or supplies; and
                    ``(C) may not expend on subcontractors, with 
                respect to the amount determined under subparagraph 
                (B), more than--
                            ``(i) 50 percent of that amount, if the 
                        category of services or supplies applicable 
                        under subparagraph (A) is described in 
                        paragraph (1); and
                            ``(ii) 50 percent of that amount, if the 
                        category of services or supplies applicable 
                        under subparagraph (A) is described in 
                        paragraph (2); and
            ``(4) in the case of a contract for supplies from a regular 
        dealer in such supplies, shall supply the product of a domestic 
        small business manufacturer or processor, unless a waiver of 
        such requirement is granted--
                    ``(A) by the Administrator, after reviewing a 
                determination by the applicable 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 by the contract; or
                    ``(B) by the Administrator 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.
    ``(b) Similarly Situated Entities.--Contract amounts expended by a 
covered small business concern on a subcontractor that is a similarly 
situated entity shall not be considered subcontracted for purposes of 
determining whether the covered small business concern has violated a 
requirement established under subsection (a) or (d).
    ``(c) Modifications of Percentages.--
            ``(1) In general.--The Administrator may change, by rule 
        (after providing notice and an opportunity for public comment), 
        a percentage specified in paragraphs (1) through (4) of 
        subsection (a) if the Administrator 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.
            ``(2) Uniformity.--A change to a percentage under paragraph 
        (1) shall apply to all covered small business concerns.
    ``(d) Other Contracts.--
            ``(1) In general.--With respect to a category of contracts 
        to which a requirement under subsection (a) does not apply, the 
        Administrator is authorized to establish, by rule (after 
        providing notice and an opportunity for public comment), a 
        requirement that a covered small business concern may not 
        expend on subcontractors more than a specified percentage of 
        the amount paid to the concern under a contract in that 
        category.
            ``(2) Uniformity.--A requirement established under 
        paragraph (1) shall apply to all covered small business 
        concerns.
            ``(3) Construction projects.--The Administrator shall 
        establish, through public rulemaking, requirements similar to 
        those specified in paragraph (1) 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 paragraph. The percentage applicable to 
        any such requirement shall be determined in accordance with 
        paragraph (2).
    ``(e) Definitions.--In this section, the following definitions 
apply:
            ``(1) Covered small business concern.--The term `covered 
        small business concern' means a business concern that--
                    ``(A) with respect to a contract awarded under 
                section 8(a), is a small business concern eligible to 
                receive contracts under that section;
                    ``(B) with respect to a contract awarded under 
                section 8(m)--
                            ``(i) is a small business concern owned and 
                        controlled by women (as defined in that 
                        section); or
                            ``(ii) is a small business concern owned 
                        and controlled by women (as defined in that 
                        section) that is not less than 51 percent owned 
                        by 1 or more women who are economically 
                        disadvantaged (and such ownership is determined 
                        without regard to any community property law);
                    ``(C) with respect to a contract awarded under 
                section 15(a), is a small business concern;
                    ``(D) with respect to a contract awarded under 
                section 31, is a qualified HUBZone small business 
                concern; or
                    ``(E) with respect to a contract awarded under 
                section 36, is a small business concern owned and 
                controlled by service-disabled veterans.
            ``(2) Similarly situated entity.--The term `similarly 
        situated entity' means a subcontractor that--
                    ``(A) if a subcontractor for a small business 
                concern, is a small business concern;
                    ``(B) if a subcontractor for a small business 
                concern eligible to receive contracts under section 
                8(a), is such a concern;
                    ``(C) if a subcontractor for a small business 
                concern owned and controlled by women (as defined in 
                section 8(m)), is such a concern;
                    ``(D) if a subcontractor for a small business 
                concern owned and controlled by women (as defined in 
                section 8(m)) that is not less than 51 percent owned by 
                1 or more women who are economically disadvantaged (and 
                such ownership is determined without regard to any 
                community property law), is such a concern;
                    ``(E) if a subcontractor for a qualified HUBZone 
                small business concern, is such a concern; or
                    ``(F) if a subcontractor for a small business 
                concern owned and controlled by service-disabled 
                veterans, is such a concern.''.

SEC. 102. PENALTIES.

    Section 16 of the Small Business Act (15 U.S.C. 645) is amended by 
adding at the end the following:
    ``(g) Subcontracting Limitations.--
            ``(1) In general.--Whoever violates a requirement 
        established under section 45 shall be subject to the penalties 
        prescribed in subsection (d), except that, for an entity that 
        exceeded a limitation on subcontracting under such section, the 
        fine described in subsection (d)(2)(A) shall be treated as the 
        greater of--
                    ``(A) $500,000; or
                    ``(B) the dollar amount expended, in excess of 
                permitted levels, by the entity on subcontractors.
            ``(2) Monitoring.--Not later than 1 year after the date of 
        enactment of this subsection, the Administrator shall take such 
        actions as are necessary to ensure that an existing Federal 
        subcontracting reporting system is modified to notify the 
        Administrator, the appropriate Director of the Office of Small 
        and Disadvantaged Business Utilization, and the appropriate 
        contracting officer if a requirement established under section 
        45 is violated.''.

SEC. 103. CONFORMING AMENDMENTS.

    (a) HUBZones.--Section 3(p)(5) of the Small Business Act (15 U.S.C. 
632(p)(5)) is amended--
            (1) in subparagraph (A)(i) by striking subclause (III) and 
        inserting the following:
                                    ``(III) with respect to any 
                                subcontract entered into by the small 
                                business concern pursuant to a contract 
                                awarded to the small business concern 
                                under section 31, the small business 
                                concern will ensure that the 
                                requirements of section 45 are 
                                satisfied; and'';
            (2) by striking subparagraphs (B) and (C); and
            (3) by redesignating subparagraph (D) as subparagraph (B).
    (b) Entities Eligible for Contracts Under Section 8(a).--Section 
8(a) of such Act (15 U.S.C. 637(a)) is amended by striking paragraph 
(14) and inserting the following:
            ``(14) Limitations on subcontracting.--A concern may not be 
        awarded a contract under this subsection as a small business 
        concern unless the concern agrees to satisfy the requirements 
        of section 45.''.
    (c) Small Business Concerns.--Section 15 of such Act (15 U.S.C. 
644) is amended by striking subsection (o) and inserting the following:
    ``(o) Limitations on Subcontracting.--A concern may not be awarded 
a contract under subsection (a) as a small business concern unless the 
concern agrees to satisfy the requirements of section 45.''.

SEC. 104. REGULATIONS.

    Not later than 180 days after the date of enactment of this Act, 
the Administrator of the Small Business Administration shall issue 
guidance with respect to compliance with the changes made to the Small 
Business Act by the amendments in this Act, with opportunities for 
notice and comment.

                     TITLE II--SUBCONTRACTING PLANS

SEC. 201. SUBCONTRACTING PLANS.

    (a) Subcontracting Reporting Requirements.--
            (1) In general.--Section 8(d)(6) of the Small Business Act 
        (15 U.S.C. 637(d)(6)) is amended--
                    (A) by striking ``(6) Each subcontracting plan'' 
                and inserting the following:
            ``(6) Subcontracting plan requirements.--Each 
        subcontracting plan'';
                    (B) by amending subparagraph (E) to read as 
                follows:
                    ``(E) assurances that the offeror or bidder will--
                            ``(i) submit--
                                    ``(I) not later than 180 days after 
                                the date on which performance under the 
                                applicable contract begins, and every 
                                180 days thereafter until contract 
                                performance ends, a report that 
                                describes all subcontracting activities 
                                under the contract during the preceding 
                                180-day period;
                                    ``(II) not later than 1 year after 
                                the date on which performance under the 
                                applicable contract begins, and 
                                annually thereafter until contract 
                                performance ends, a report that 
                                describes all subcontracting activities 
                                under the contract that have occurred 
                                before the date on which the report is 
                                submitted (except that, with respect to 
                                the Department of Defense and the 
                                National Aeronautics and Space 
                                Administration, a report under this 
                                subclause shall be submitted not later 
                                than 180 days after the date on which 
                                contract performance begins and every 
                                180 days thereafter until contract 
                                performance ends); and
                                    ``(III) not later than 30 days 
                                after the date on which performance 
                                under the applicable contract ends, a 
                                report that describes all 
                                subcontracting activities under the 
                                contract; and
                            ``(ii) cooperate with any study or survey 
                        required by the applicable Federal agency or 
                        the Administration to determine the extent of 
                        compliance by the offeror or bidder with the 
                        subcontracting plan;''; and
                    (C) by moving the margins for subparagraphs (A), 
                (B), (C), (D), and (F) 2 ems to the right (so that the 
                align with subparagraph (E), as amended by subparagraph 
                (B) of this paragraph).
            (2) Reporting system modification.--
                    (A) In general.--Not later than 1 year after the 
                date of enactment of this Act, the Administrator of the 
                Small Business Administration shall take such actions 
                as are necessary to ensure that the Federal 
                subcontracting reporting system to which covered 
                reports are submitted is modified to notify the 
                Administrator, the appropriate contracting officer, and 
                the appropriate Director of Small and Disadvantaged 
                Business Utilization if an entity fails to submit a 
                required covered report. If the Administrator does not 
                modify the subcontracting reporting system on or before 
                the date that is 1 year after the date of enactment of 
                this Act, the Administrator may not carry out or 
                establish any pilot program until the date the 
                Administrator modifies the reporting system.
                    (B) Covered report defined.--In this paragraph, the 
                term ``covered report'' means a report submitted in 
                accordance with assurances provided under section 
                8(d)(6)(E) of the Small Business Act (15 U.S.C. 
                637(d)(6)(E)).
    (b) Failure To Submit Subcontracting Reports as Breach of 
Contract.--Section 8(d)(8) of such Act (15 U.S.C. 637(d)(8)) is 
amended--
            (1) by striking ``(8) The failure'' and inserting the 
        following:
            ``(8) Material breach.--The failure'';
            (2) in subparagraph (A) by striking ``subsection, or'' and 
        inserting ``subsection,'';
            (3) in subparagraph (B) by striking ``subcontract,'' and 
        inserting ``subcontract, or'';
            (4) by inserting after subparagraph (B) the following:
                    ``(C) assurances provided under paragraph 
                (6)(E),''; and
            (5) by moving the margins of subparagraphs (A), (B), and 
        the matter following subparagraph (B) 2 ems to the right.
    (c) Authority of Small Business Administration.--Section 8(d)(10) 
of such Act (15 U.S.C. 637(d)(10)) is amended--
            (1) by striking ``(10) In the case of'' and inserting the 
        following:
            ``(10) Authority of administration.--In the case of'';
            (2) in subparagraph (B) by striking ``, which shall be 
        advisory in nature,'';
            (3) in subparagraph (C) by striking ``, either on a 
        contract-by-contract basis, or in the case contractors'' and 
        inserting ``as a supplement to evaluations performed by the 
        contracting agency, either on a contract-by-contract basis or, 
        in the case of contractors''; and
            (4) by moving the margins of subparagraphs (A) through (C) 
        2 ems to the right.
    (d) Appeals.--Section 8(d) of such Act (15 U.S.C. 637(d)) is 
amended by adding at the end the following:
            ``(13) Appeals.--
                    ``(A) In general.--If a procurement center 
                representative or commercial market representative 
                determines that a subcontracting plan required under 
                paragraph (4) or (5) fails to provide the maximum 
                practicable opportunity for covered small business 
                concerns to participate in the performance of the 
                contract to which the plan applies, such representative 
                may delay acceptance of the plan in accordance with 
                subparagraph (B).
                    ``(B) Process.--A procurement center representative 
                or commercial market representative who makes the 
                determination under subparagraph (A) with respect to a 
                subcontracting plan may delay acceptance of the plan 
                for a 30-day period by providing written notice of such 
                determination to appropriate personnel of the 
                contracting agency. Such notice shall include 
                recommendations for altering the plan to provide the 
                maximum practicable opportunity described in that 
                subparagraph.
                    ``(C) Disagreements.--If a procurement center 
                representative or commercial market representative 
                delays the acceptance of a subcontracting plan under 
                subparagraph (B) for a 30-day period and, during such 
                period, does not reach agreement with appropriate 
                personnel of the contracting agency to alter the plan 
                to provide the maximum practicable opportunity 
                described in subparagraph (A), the disagreement shall 
                be submitted to the head of the contracting agency by 
                the Administrator for a final determination.
                    ``(D) Covered small business concerns defined.--In 
                this paragraph, the term `covered small business 
                concerns' means small business concerns, qualified 
                HUBZone small business concerns, small business 
                concerns owned and controlled by veterans, small 
                business concerns owned and controlled by service-
                disabled veterans, small business concerns owned and 
                controlled by socially and economically disadvantaged 
                individuals, and small business concerns owned and 
                controlled by women.''.

SEC. 202. NOTICES OF SUBCONTRACTING OPPORTUNITIES.

    Section 8(k)(1) of the Small Business Act (15 U.S.C. 637(k)(1)) is 
amended by striking ``in the Commerce Business Daily'' and inserting 
``on the appropriate Federal Web site (as determined by the 
Administrator)''.

SEC. 203. REGULATIONS.

    Not later than 180 days after the date of enactment of this Act, 
the Administrator of the Small Business Administration shall issue 
guidance with respect to the changes made to the Small Business Act, 
with opportunity for notice and comment.

                         TITLE III--INSOURCING

SEC. 301. DEFINITIONS RELATING TO PROCUREMENT PROTEST SYSTEM.

    (a) Protest.--Section 3551(1) of title 31, United States Code, is 
amended by adding at the end the following:
                    ``(F) Conversion of a function that is being 
                performed by a small business concern to performance by 
                a Federal employee.''.
    (b) Interested Party.--Section 3551(2) of such title is amended--
            (1) in subparagraph (A) by striking ``and'' at the end;
            (2) in subparagraph (B) by striking the period at the end 
        and inserting ``; and''; and
            (3) by adding at the end the following:
                    ``(C) with respect to a conversion described in 
                paragraph (1)(F), means a small business concern (as 
                that term is defined in section 3(a) of the Small 
                Business Act) whose economic interest would be affected 
                by the conversion.''.

SEC. 302. INSOURCING.

    The Small Business Act (15 U.S.C. 631 et seq.), as amended by this 
Act, is further amended by inserting after section 45 the following:

``SEC. 46. INSOURCING.

    ``A Federal agency may only convert a function that is being 
performed by a small business concern to performance by a Federal 
employee if--
            ``(1) the agency has made publicly available, after 
        providing notice and an opportunity for public comment, the 
        procedures of the agency with respect to decisions to convert a 
        function being performed by a small business concern to 
        performance by a Federal employee; and
            ``(2) the procedures described in paragraph (1) include 
        that all decisions described in such paragraph are reviewed by 
        any appropriate--
                    ``(A) Office of Small and Disadvantaged Business 
                Utilization; and
                    ``(B) procurement center representative.''.
                                                 Union Calendar No. 534

112th CONGRESS

  2d Session

                               H. R. 3893

                      [Report No. 112-731, Part I]

_______________________________________________________________________

                                 A BILL

  To amend the Small Business Act with respect to subcontracting and 
                  insourcing, and for other purposes.

_______________________________________________________________________

                           December 27, 2012

    Reported from the Committee on Small Business with an amendment

                           December 27, 2012

The Committee on Oversight and Government Reform discharged; committed 
   to the Committee of the Whole House on the State of the Union and 
                         ordered to be printed