[Congressional Record Volume 140, Number 35 (Thursday, March 24, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 24, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. GRAHAM:
  S. 1965. A bill to amend the Omnibus Crime Control and Safe Streets 
Act of 1968 to establish a national clearinghouse to assist in 
background checks of law enforcement applicants; to the Committee on 
the Judiciary.


   law enforcement and correctional offi-cers employment 
                        registration act of 1994

 Mr. GRAHAM. Mr. President, today I am introducing the Law 
Enforcement and Correctional Officers Employment Registration Act of 
1994, which will establish a national clearinghouse to assist in 
background checks on law enforcement applicants. The bill is a 
companion to H.R. 3272, introduced by Florida Congressman Harry A. 
Johnston.
  This legislation would establish a national data bank that would 
provide quick, accurate, and prior officer employment history on all 
applicants for law enforcement agencies to access. This clearinghouse 
has been called a Pointer File and simply maintains basic information 
of all certified officers, including names, dates of birth, Social 
Security numbers, and dates of employment.
  The intent of my legislation is to help prevent what ``Dateline NBC'' 
has referred to as Gypsy Cops. These are police officers who have been 
dismissed or have been forced to resign from previous positions but 
conceal prior employment history in future job applications.
  In the case of the beating death of Bobby Jewett on November 24, 
1990, in West Palm Beach, FL, ``Dateline NBC'' was able to subsequently 
trace the prior employment histories of the two officers involved in 
the case through four States and eight different law enforcement 
agencies. Much of this had been concealed in their job applications.
  As noted in a Tampa Tribune editorial on June 29, 1993, in support of 
the establishment of a clearinghouse, ``Few agencies, particularly 
those in rural areas and smaller towns, have the personnel and 
resources to conduct thorough background checks on police applicants. 
Not even the largest agencies always succeed in finding an officer's 
past if he or she is determined to hide it.''
  Florida Department of Law Enforcement Commissioner James T. Moore 
adds, ``Experience has shown that, after being found guilty of 
misconduct, many problem officers resign or are fired, only to seek 
police jobs elsewhere. The clearinghouse system would allow a law 
enforcement agency to review each officer applicant's prior history as 
an officer.''
  Of importance, the clearinghouse would not contain information 
relating to causes of dismissal in order to protect the rights of 
officers. The law enforcement agency would remain responsible to 
conduct a thorough background check, but it would ensure that police 
officers could no longer conceal their prior history simply by moving 
from one State to another.
  Thomas J. O'Loughlin, Chief of Police of Wellesley, notes, ``The 
safety of the citizens of this Commonwealth and this Nation is either 
weakened or solidified by the character of the individuals that we 
entrust with the responsibility to protect. This legislation provides 
society with the necessary tools to ensure that individuals who have 
violated this trust do not simply relocate and once again commit 
grievous offenses against the public good, and it ensures that a 
complete and thorough background investigation will be completed prior 
to an individual assuming the public's trust to be a protector of 
society.''
  I would like to thank Commissioner Moore, Joe White at the Florida 
Department of Law Enforcement, Florida's Criminal Justice Standards and 
Training Commission and the International Association of Chiefs of 
Police for their initiative in this area to protect the effectiveness 
and professionalism in law enforcement and the public's safety.
  I urge my colleagues to join me in support of this legislation. Mr. 
President, I ask unanimous consent that the full text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1965

       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 ``Law Enforcement and 
     Correctional Officers Employment Registration Act of 1994.''

     SEC. 2. FINDINGS.

       The Congress finds that--
       (1) law enforcement officials, including members of the 
     International Association of Chiefs of Police recognize that 
     violent crime represents the greatest threat to the safety 
     and security of citizens and that dedicated, ethical law 
     enforcement professionals and lawful community initiatives 
     with participation by members of the community represent the 
     best hope of responding to the challenges of violent crime;
       (2) the International Association of Chiefs of Police 
     acknowledges that a few officers choose to violate the public 
     trust by abusing their authority or by breaking the law. Such 
     officers should not be able to seek police employment in 
     another state or jurisdiction with the expectation that they 
     will be able to conceal their history of misconduct;
       (3) there have been numerous documented cases of officers 
     who have obtained officer employment and certification in a 
     state after revocation of officer certification or 
     dishonorable discharge in another state;
       (4) a national clearinghouse of officer employment 
     histories would enable each criminal justice agency to 
     conduct thorough background checks on officer applicants and 
     to assure that only honest ethical officers are permitted to 
     serve; and
       (5) Federal legislation is needed that would require 
     Federal registration of employment termination data of law 
     enforcement officers and correctional officers.

     SEC. 3. REGISTRATION.

       Subpart 1 of part E of the Omnibus Crime Control and Safe 
     Streets Act of 1968 (42 U.S.C. 3781 et seq.) is amended by 
     adding at the end thereof the following;


 ``Registration of Employment Data of Law Enforcement and Correctional 
                               Officers.

       ``Sec. 509a. a(1) The Governor of each state, or chief 
     executive of each Territory of the United States, the 
     District of Columbia or a Native American Indian tribe or 
     band that receives funds under section 506 in a fiscal year 
     shall designate the state peace officer standards board or 
     its equivalent which shall submit a list, maintained 
     electronically, of all law enforcement and correctional 
     officers who held such office in such State or territory, the 
     District of Columbia or a Native American Indian tribe or 
     band on or since January 1, 1994, in accordance with 
     paragraph (2). The list shall be submitted to an officer or 
     agency designated by the Attorney General of the United 
     States. The head of each department, agency, or other entity 
     in the executive branch of the United States Government that 
     employs law enforcement or correctional officers shall submit 
     a list of all such personnel employed on or after January 1, 
     1994. Such list shall be updated and supplemented by agencies 
     or officials responsible for submission of employment data in 
     accordance with subsection (b).
       ``(2) Such list shall include the names (and any former 
     names), dates of birth, social security numbers, Federal 
     Bureau of Investigation fingerprint identification numbers if 
     known, the dates of appointment as officers if known, the 
     names and addresses or National Crime Information Center 
     numbers of the appointing or employing agencies, and if 
     applicable, the dates such service ended for such officers.
       ``(b) The agency or official responsible for submission of 
     such employment data shall, not later than 90 days after an 
     officer's employment, appointment, or separation from 
     employment or appointment, notify the agency or officer 
     designated by the Attorney General of the United States to 
     receive such employment data, that a law enforcement officer 
     or correctional officer has been appointed or employed as an 
     officer, or that a registered officer is no longer empowered 
     or employed as such. If the former officer has had officer 
     certification revoked for cause, that fact shall be reported.
       ``(c) For purposes of this section--
       ``(1) The term `law enforcement officer' means a federal 
     law enforcement officer, or an individual who is elected or 
     appointed by a State or territory, or a political subdivision 
     thereof, by the District of Columbia or by a Native American 
     Indian tribe or band, to conserve the peace, or to make 
     arrests or serve warrants, or to otherwise possess or 
     exercise the authority of a peace officer. In the case of law 
     enforcement officers elected or appointed by a State or a 
     political subdivision thereof, `law enforcement officer' only 
     includes those required by the applicable law of the State to 
     be licensed or certified. ``(2) The term `correctional 
     officer' means a federal correctional officer, or an 
     individual who is elected or appointed by a State 
     or territory, or a political subdivision thereof, by the 
     District of Columbia or by a Native American Indian tribe 
     or band to guard or supervise prisoners or inmates of 
     jails or other detention, penal or correctional 
     facilities. In the case of correctional officers elected 
     or appointed by a State or a political subdivision 
     thereof, `correctional officer' only includes those 
     required by the applicable law of the state to be licensed 
     or certified.
       (3) ``The term `certification revoked for cause' means 
     cancellation or revocation of an individual's law enforcement 
     officer or correctional officer state professional license by 
     a state peace officer standards board or its equivalent after 
     administrative due process has been afforded the officer.''
       A `law enforcement officer' or `correctional officer' 
     includes an individual whether compensated for services or 
     not, whether full-or part-time, and whether appointment, 
     election or term of office is temporary or permanent. Such 
     terms do not include citizens who are called to assist an 
     officer in the performance of the officer's duties, unless 
     such citizen received a deputation or commission of 
     appointment lasting longer than 30 days.
       ``(d)(1) As a condition of employment, each State, 
     territory, or political subdivision thereof, the District of 
     Columbia, each Native American Indian tribe or band and each 
     Federal agency that employs law enforcement officers or 
     correctional officers shall require all applicants for 
     appointment to or employment in such positions before 
     beginning employment--
       ``(A) to disclose all prior service or employment as a law 
     enforcement or correctional officer, and
       ``(B) to submit a ``written authorization and request for 
     release of information'', on a form prescribed by the 
     Attorney General or designee,
       ``(2) When a prospective law enforcement or correctional 
     employer obtains an officer's required ``written 
     authorization and request for release of information,'' the 
     Attorney General (or designee) is directed ro release all 
     data collected under subsections (a) and (b) of this section 
     to such prospective employer.
       ``(3) Upon receipt of completed ``written authorization and 
     request for release of information and not later than 30 days 
     after such officer is first appointed or employed or at any 
     time prior to the appointment or employment of an applicant, 
     each State, territory, and political subdivision thereof, the 
     District of Columbia, each Native American Indian tribe or 
     band and each Federal agency that employs law enforcement or 
     correctional officers shall notify the Attorney General (or 
     designee).
       ``(e) The Attorney General shall issue regulations for the 
     implementation of this section and the operation of the 
     employment data clearinghouse.
       ``(f) Agencies or agency administrators who submit 
     employment or officer certification data pursuant to this 
     section are presumed to be acting in good faith and, unless 
     lack of good faith is shown by clear and convincing evidence, 
     are immune from civil liability for such disclosure or its 
     consequences. The presumption of good faith is rebutted upon 
     a showing that the data was submitted with knowledge of its 
     falsity or was submitted with the malicious intent to 
     deliberately mislead.''

     SEC. 4. EFFECTIVE DATE.

       (a) In General.--This Act shall take effect October 1, 
     1994.
       (b) Information Compliance.--Lists required under section 
     509a (a) of the Omnibus Crime Control and Safe Streets Act of 
     1968 shall be submitted not later than 180 days after the 
     enactment of this Act. Not later than 180 days after the 
     enactment of this Act, each State, territory, or political 
     subdivision thereof, the District of Columbia, each Native 
     American Indian tribe or band and each federal agency 
     employing law enforcement and correctional officers shall 
     comply with the requirements described in subsection (d) of 
     section 509a of the Omnibus Crime Control and Safe Streets 
     Act of 1968. The Director of the Bureau of Justice assistance 
     may authorize grants to agencies to assist in their 
     compliance with Subsection (1) of this Act.

     SEC. 5. REPORTS.

       Not later than 2 years after the date of the enactment of 
     this Act, the Attorney General, upon consultation with the 
     Director of the Bureau of Justice Sssistance, shall submit a 
     report to the Committees on the Judiciary of the House of 
     Representatives and the Senate evaluating the compliance with 
     the requirements of section 509a of the Omnibus Crime Control 
     and Safe Streets Act of 1968, and listing each State, 
     territory, or political subdivision thereof, the District of 
     Columbia, each Native American Indian tribe or band and each 
     Federal agency employing law enforcement or correctional 
     officers that has failed materially to comply with the 
     requirements of this section. Such subsequent reports shall 
     be presented as are deemed appropriate by the Attorney 
     General.
                                 ______

      By Mr. METZENBAUM:
  S. 1967. A bill to require providers of home infusion therapy 
services to be licensed; to the Committee on Labor and Human Resources.


       sarah weber home infusion consumer protection act of 1994

 Mr. METZENBAUM: Mr. President, I introduce the Sarah Weber 
Home Infusion Protection Act. This legislation will provide badly 
needed regulation of the home infusion therapy industry.
  Home infusion therapy is one of the cutting edge health care delivery 
services in the United States. Theoretically, home infusion therapies 
are offered to patients as a means of reducing exorbitant hospital fees 
by transferring the patient from the hospital to the comfort of their 
own home where infusion therapy can be administered by a family member.
  However, in practice, the home infusion industry has used home 
treatment as an opportunity for price gouging. The fees charged by the 
companies that deliver home infusion services have exceeded the cost of 
providing home infusion therapies in the hospital. According to Scripps 
Howard newspaper reporters Lisa Hoffman and Andrew Schneider, some home 
infusion companies have charged patients fees that were 2,000 percent 
higher then the fees charged at the hospital.
  And yet, the exorbitant fees charged by the home infusion companies 
is simply the tip of the iceberg. The Office of the Inspector General 
at the Department of Health and Human Services has uncovered ``kick 
back'' schemes between home infusion therapy companies and doctors. In 
several instances, the Inspector General discovered direct payment for 
referrals, stock bonuses based on the amount of referrals, and payment 
for falsifying papers declaring a patient demonstrating need for home 
infusion therapies.
  While the Scripps Howard reporters have documented abuses in home 
infusion therapy industry all across the country, the Inspector General 
has uncovered unscrupulous practices, and the television news program 
20/20 has exposed the blatant practices of the home infusion industry, 
I have found the story of one mother and daughter in Cleveland 
particularly compelling.
  When Marie Kostos-Weber from Cleveland, Ohio was faced with the 
decision to remove her 7-year old daughter stricken with cerebral palsy 
from the hospital after a grueling six-month stay, she assumed that 
treatment would be less expensive and more humane within her own home. 
Ms. Kostos-Weber, a divorced, single working mother opted for home 
infusion therapy to reduce her medical costs, and spend more time at 
home with her 6 other children. Little did she know what she was about 
to encounter.

  After a year of therapy, Ms. Kostos-Weber's insurance company 
notified her that she had reached the $1 million limit on two insurance 
policies. Up until that time, she did not know of the exorbitant prices 
charged for her daughter's home medical treatment because the home 
infusion therapy company that provided Sarah's care sent bills only to 
the insurance company, and not to Marie.
  Marie discovered that Sarah's home infusion therapy cost was $100,000 
a month, $1,000 more per day than at the hospital with 24 hour nurses. 
She also determined that she was being over charged for certain drugs. 
In one case, the home infusion company's own cost for her daughter's 
medication was $3.50 per unit, yet when sold to the patient the price 
escalated to $122.81 per unit of medication, a mark-up of over 3000 
percent.
  Not only was Sarah's family severely over charged for medical 
equipment and services, but unnecessary medication was added to her 
medical regime. Ms. Kostos-Weber recalls spotting ``fentanyl'', a 
foreign drug delivered to her home as part of the medication to be 
administered to her daughter. Luckily, she phoned her pharmacist who 
informed her that fentanyl is a deadly drug used to immobilize a 
patient before surgery. Sarah could have died from this ``slight 
oversight''.
  In the end, Ms. Kostos-Weber was forced to quit her job to qualify 
for Ohio medicaid to assist with the astronomical costs of home 
infusion therapies--a method originally intended to save people from 
inflated hospital costs. Sadly, Sarah Weber's young life ended last 
August. However, her mother has not given up the fight and today 
Congressman Brown and I are introducing legislation in memory of Sarah.
  The bill I am introducing today will require licensing of providers 
of home infusion therapy services. The Secretary of Health and Human 
Services, shall establish standards for licensing to ensure that home 
infusion services are provided in a safe, high quality manner at a 
reasonable cost. In addition, this legislation will prohibit a 
physician from making a referral to a home infusion therapy service 
with which the physician has a financial relationship.
  The President's health care plan contains language on the delivery of 
home infusion therapies similar to the legislation I am introducing 
today. I am hopeful that we will be able to adopt this language in the 
President's health care package so that families will not endure the 
same frustration that Sarah Weber's family did.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1967

       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 ``Sarah Weber Home Infusion 
     Consumer Protection Act of 1994''.

     SEC. 2. LICENSING OF PROVIDERS OF HOME INFUSION THERAPY 
                   SERVICES.

       (a) Requirement.--No person shall provide (or arrange for 
     the provision of) home infusion therapy services in a State 
     unless the person is licensed by the State in accordance with 
     this section to provide (or arrange for the provision of) 
     such services. No State shall license such a person unless 
     the State finds that the person meets the standards for 
     licensing established under this section.
       (b) Standards.--
       (1) In general.--The Secretary of Health and Human Services 
     shall establish standards for the licensing of persons 
     providing (or arranging for the provision of) home infusion 
     therapy services consistent with this subsection.
       (2) Supervision.--A person licensed under this section 
     shall only provide (or arrange for the provision of) home 
     infusion therapy services to an individual who is under the 
     care of a physician and under a plan established and 
     periodically reviewed by a physician.
       (3) Provider qualifications.--A person shall not be 
     licensed consistent with this section unless the person--
       (A) has been determined to be capable of providing, or 
     arranging for the provision of, home infusion therapy 
     services;
       (B) maintains clinical records on all individuals for whom 
     the person provides (or arranges for the provision of) such 
     services;
       (C) adheres to written protocols and policies with respect 
     to the provision (or arrangement for the provision) of 
     services;
       (D) makes services available (as needed) 7 days a week on a 
     24-hour basis;
       (E) coordinates all home infusion therapy services with the 
     patient's physician;
       (F) conducts a quality assessment and assurance program, 
     including drug regimen review and coordination of patient 
     care;
       (G) assures that only trained (or licensed if necessary) 
     personnel provide infusion products (and any other service 
     for which training is required to safely provide the 
     service);
       (H) assumes responsibility for the quality of services 
     provided by others under arrangements with such person;
       (I) establishes appropriate protocols and explains such 
     protocols clearly to patients before the initiation of a 
     treatment plan; and
       (J) meets such other requirements as the Secretary may 
     determine are necessary (A) to assure the safe and effective 
     provision of home infusion therapy services, and (B) 
     respecting the quality of the provision of such services and 
     the charges for such services.

     A protocol referred to in subparagraph (I) shall include a 
     provision for appropriate notification of individuals 
     receiving home infusion therapy services in the event of the 
     cancellation of the provision of those services.
       (4) Fee.--A person shall not be licensed consistent with 
     this section unless the person assures that charges for the 
     provision of home infusion therapy services by the person (or 
     under arrangements made by the person) shall not exceed such 
     a fee as the Secretary by regulation may establish to assure 
     that the charge for such services is reasonably related to 
     the services actually provided.
       (c) Enforcement.--Compliance with the requirements of 
     subsection (a) shall be enforced under the Federal Trade 
     Commission Act by the Secretary of Health and Human Services. 
     A violation of any such requirement shall constitute an 
     unfair or deceptive act or practice in commerce in violation 
     of section 5(a) of the Federal Trade Commission Act and shall 
     be subject to enforcement under section 5(b) of such Act 
     irrespective of whether the person who committed such 
     violation is engaged in commerce or meets any other 
     jurisdictional test in such Act. The Secretary shall have 
     such procedural, investigative, and enforcement powers in 
     enforcing compliance with such requirements and may require 
     the filing of reports, the production of documents, and the 
     appearance of witnesses as though the applicable terms of 
     such Act were part of this section.

     SEC. 3. LIMITATION ON PHYSICIAN REFERRALS.

       (a) General Rule.--Except as provided in this section, if a 
     physician (or an immediate family member of such physician) 
     has a financial relationship with an entity described in 
     section 1877(a)(2) of the Social Security Act, then the 
     physician may not make a referral to the entity for the 
     furnishing of home infusion therapy services.
       (b) Incorporation of Medicare Physician Ownership and 
     Referral Provisions.--The provisions of subsections (b) 
     through (h) of section 1877 of the Social Security Act (other 
     than subsections (f) and (g)(1)) shall apply with respect to 
     subsection (a) of this section in the same manner as they 
     apply to section 1877(a) of such Act. In applying the 
     previous sentence, any reference to a ``designated health 
     service'' is deemed to be a reference to home infusion 
     therapy services.
       (c) Additional Exception for Compensation Arrangement for 
     Management of Patient and Coordination of Care.--In applying 
     subsection (b), in addition to the exceptions described in 
     section 1877(e) of the Social Security Act, payment of 
     reasonable compensation to a physician for the management of 
     patient and coordination of care shall not be considered to 
     be a compensation arrangement described in section 
     1877(a)(2)(B) of such Act.
       (d) Treatment of Prescription As a Referral.--In applying 
     subsection (b) and in addition to section 1877(h)(5) of the 
     Social Security Act, the prescription of a drug to be 
     administered through home infusion constitutes a ``referral'' 
     by a ``referring physician''.

     SEC. 4. HOME INFUSION THERAPY SERVICES DEFINED.

       For purposes of this Act, the term ``home infusion therapy 
     services'' means the nursing, pharmacy, and related services, 
     including medical supplies, intravenous fluids, delivery, and 
     equipment, required for the provision of therapeutic agents 
     to patients by parenteral administration, including 
     intravenous, intra-arterial, subcutaneous, epidural, 
     intrathecal, intramuscular, and peritoneal infusion, by an 
     enteral feeding tube for the purpose of improving or 
     maintaining an individual's health condition in the 
     individual's residence.

     SEC. 5. EFFECTIVE DATES.

       (a) Licensing Requirement.--
       (1) In general.--Except as provided in paragraph (2), 
     section 3(a) shall apply to home infusion therapy services 
     provided on or after the first day of the first month that 
     begins more than 90 days after the date of the enactment of 
     this Act, without regard to whether or not the Secretary of 
     Health and Human Services issues final regulations to carry 
     out such section have been promulgated by such date.
       (2) State legislation.--In the case of a State which the 
     Secretary of Health and Human Services determines requires 
     State legislation (other than legislation appropriating 
     funds) in order for the State to provide for the licensing 
     required under section 3(a), section 3(a) shall not apply in 
     the State for home infusion therapy services provided before 
     the first day of the first calendar quarter beginning after 
     the close of the first regular session of the State 
     legislature that begins after the date of the enactment of 
     this Act. For purposes of the previous sentence, in the case 
     of a State that has a 2-year legislative session, each year 
     of such session shall be deemed to be a separate regular 
     session of the State legislature.
       (b) Limitation on Referrals.--Section 4 shall apply to 
     referrals made after December 31, 1994.
                                 ______

      By Mr. BREAUX (for himself and Mr. Johnston):
  S. 1968. A bill to amend the Internal Revenue Code of 1986 to permit 
the taxfree rollover of certain payments made by employers to separated 
employees; to the Committee on Finance.


              internal revenue Code of 1986 amendment act

 Mr. BREAUX. Mr. President, in most of our States, we have seen 
employers reduce their work forces to remain competitive in this 
increasingly worldwide economy. Many of these employers have chosen to 
offer early retirement packages as a measure to help the employees that 
choose or are forced into early retirement. Many of the packages 
include lump sum payments that are not from qualified retirement plans. 
Because they are not from qualified retirement plans, these payments 
cannot be rolled over immediately into an Individual Retirement Account 
or other qualified retirement plan without being subject to taxation 
first.
  Instead, the employee is required to pay tax on the lump sum at tax 
rates that are much higher than the marginal tax rate their income 
would normally be subject to. In many cases, these employees will turn 
over 40 to 50 percent of their early retirement benefit as tax payments 
to the Government.
  These employees are losing their jobs. It adds insult to injury that 
the Government takes such a large bite of these early retirement 
payments. Moreover, these funds are intended to be early retirement 
payments. Our tax policy should not prevent taxpayers from saving the 
entire amount for when they ultimately retire.
  Mr. President, I believe that this current tax treatment needs 
changing. Therefore, the bill I am introducing today will allow 
employees, that lose their job as a result of significant downsizing 
and that receive a separation payment, to roll those funds over into an 
Individual Retirement Account--without paying taxes first. When the 
funds are ultimately withdrawn income taxes will be paid.
  Mr. President, times are changing and our policies must change with 
the times. There was a time when employees could rely on keeping their 
jobs for life so long as they did a good job. With the economy becoming 
more international, job stability is uncertain. Employers must be more 
competitive. Therefore, I expect we will see more downsizing and more 
severance payments offered. In light of all of this uncertainty let's 
make sure the employees can have at least some security for their 
futures, let's let these employees, not the Federal treasury, keep 
their early retirement funds.
  I urge my colleagues to cosponsor this legislation.
                                 ______

      By Mr. McCAIN:
  S. 1971. A bill to require the reauthorization of executive reporting 
requirements at least every 5 years; to the Committee on Governmental 
Affairs.


              the reporting requirement sunset act of 1994

 Mr. McCAIN. Mr. President, I introduce a bill which will help 
bring about the demise of thousands of unnecessary reports that are 
required by the Congress each year, and force the Congress to reexamine 
the merits of the remainder.
  I am dedicated to reducing the thousands of burdensome and costly 
reports that are mandated by the Congress. This legislation, the 
Reporting Requirement Sunset Act of 1994 will achieve some very 
important results in this regard. This legislation will sunset in 5 
years all reports required by law, except for those related to 
financial accountability. This proposal will permit the President to 
submit any reports one additional time after that 5 year period if he 
determines it to be necessary. I would point out that any Federal 
agency or the White House, of course, can continue to provide whatever 
information it deems necessary and appropriate to the Congress at any 
time, regardless of any legislative mandates from the Congress.
  Furthermore, this legislation will require the President to include a 
list of reporting requirements he feels are wasteful or unnecessary in 
his next budget submission to the Congress.
  This is a very basic piece of legislation, but one I feel will be 
extremely valuable if we are truly to embark upon a process of 
reinventing government. A good start would be to deinvent some of the 
unnecessary reporting requirements that the Congress has continued to 
foist upon Federal agencies.
  In his ``National Performance Review,'' which commented at length on 
many of the unproductive tendencies of the Congress, Vice President 
Gore said: ``Over the past decades, we have thrown layer upon layer of 
reporting requirements on Federal agencies, creating an almost endless 
series of required audits, (and) reports * * * '', and he noted that 
the executive branch's ``calendar is jammed with report deadlines.''
  Vice President Gore's report found that, ``In Fiscal year 1993, 
Congress required executive branch agencies to prepare 5,348 reports,'' 
and expressed dismay that these duplicative burdens ``trapped agencies 
in a blizzard of paperwork.''
  The Congress's habit of burdening Federal agencies with unnecessary 
reporting requirements is quite serious, and it is getting worse. The 
General Accounting Office [GAO] found that one House committee alone 
received over 800 reports from Federal agencies in response to 
mandatory reporting requirements in just the 101st Congress. Another 
600 reports were sent to the same committee in the following Congress.

  To demonstrate just how heavy this burden can be, the Office of 
Management and Budget [OMB] had to submit 38 reports to one single 
House committee to comply with a single piece of legislation--the 1990 
Budget Reconciliation Act.
  Furthermore, the GAO also has stated that the ``Congress imposes 
about 300 new requirements on Federal agencies each year. As of March 
1992, there were 3,719 requirements and 3,331 communications in the 
102d Congress database.''
  Ironically, ``reducing congressional reports'' is an issue that the 
GAO itself has reported on to Congress at least 15 times. I think we 
would be wise to finally begin to address this mandate malady in a 
substantive manner, and the passage of this bill would be a decisive 
first step.
  This legislation is broad in its reach, but in no way will stop the 
Congress from being properly and routinely informed about important 
issues. Under this bill, the Congress will have 5 years in which to 
reauthorize any reports it deems are truly necessary.
  Sunsetting all congressionally mandated reports, except for those 
dealing with financial accountability, will force the Congress to 
address just what are legitimate reporting requirements. I think it is 
clear that many of the thousands of reports that are currently required 
by Federal law will not meet any reasonable standard of merit, and 
should therefore be done away with.
  The Senate should act vigorously to begin the long-term process that 
is necessary to unburden the executive branch and the American people 
from the morass of congressional micro-management. That means cutting 
out wasteful pork-barrel spending and unjustified earmarks in 
appropriations bills, reducing red tape and costly regulations, and 
terminating thousands of mandated reports. By ``sunsetting'' all 
mandated reports which have not been reauthorized by the Congress, as 
called for in this legislation, we will be empowering Federal agencies 
to work better and cost less, and we'll be on our way to reinventing 
government.
  By excluding reporting requirements that relate to financial 
accountability, my objective is to safeguard the continuation of 
important financial data to be conveyed to the Congress under such 
legislation as the Financial Integrity Act and the Inspector General 
Act. In reducing unnecessary reporting requirements, we must also 
ensure that the Congress fully meets its responsibility to monitor how 
taxpayer funds are being spent by Federal agencies.
  The administration's proposals to alleviate the burden of reporting 
requirements on the executive branch, as reported out of the Senate's 
Governmental Affairs Committee, are well-intentioned but inadequate. 
This legislation, H.R. 3400, merely says that the Director of OMB ``may 
adjust the frequency and due dates'' of mandatory reports, and only for 
a certain period of time. In addition, that bill states that the 
President ``may publish a list'' of unnecessary reporting requirements 
in his annual budget submission to Congress. The President should be 
required to make this recommendation, and this legislation will require 
that.
  Let me emphasize, Mr. President, that this legislation will not cause 
any important report to be terminated. The Congress can and will 
authorize every report that is necessary at the appropriate time. I 
have authored legislation that required reports, as have most of my 
colleagues. Due to the massive accumulation of paperwork requirements 
we have forced upon the executive branch, however, every Member of 
Congress should bear the responsibility of deciding which reports are 
essential, as opposed to being of momentary interest.
  Forcing the Congress to make judgments about the practical value of 
mandatory reports is one of the objectives of this proposal. It should 
be our job to do so, and it's time we focus on what's really important, 
and stop suffocating the executive branch with layers upon layers of 
wasteful paperwork requirements.
  I highly commend Senator Levin and Senator Cohen, the chairman and 
ranking member of the Government Affairs Committee's Oversight 
Subcommittee for their considerable efforts to eliminate specific 
mandatory reports. I strongly believe that my legislation will build 
upon their ongoing work in this area. I intend to offer this 
legislation as an amendment to a relevant government reform initiative 
that may be brought before the Senate, and I hope my colleagues will 
support it to sweep away many of the reporting mandates the Congress 
has placed upon Federal agencies over the years.
                                 ______

      By Mr. BINGAMAN:
  S. 1972. A bill to amend title I of the Omnibus Crime Control and 
Safe Streets Act of 1968 to authorize inclusion in a community policing 
grant of funds to pay 25 percent of the cost of providing bulletproof 
vests for 100,000 police officers; to the Committee on the Judiciary.


             the bulletproof vest police safety act of 1994

 Mr. BINGAMAN. Mr. President, I offer legislation that will 
help provide bulletproof vests for the 100,000 officer positions 
created in the Senate crime bill.
  In the mid-1970's, law enforcement officers began to wear bulletproof 
vests. Since this time period, it is estimated that more than 1,650 
officers have been saved by wearing the vests. Today, our officers are 
exposed to greater danger than ever before. Today's weapons cause more 
destruction and the criminals who utilize these weapons have become 
very sophisticated in their techniques. In an effort to make our 
communities safer, Congress is currently considering a companion crime 
bill. Specifically, there is a provision in the Senate passed version 
that will place 100,000 officers on the streets of American communities 
over the next 5 years. Once the crime bill becomes law, we will ask 
those 100,000 officers to protect society.
  Today, I am offering a bill that asks society to help protect 100,000 
officers.
  Under this bill, the Federal Government, under the authority of the 
Attorney General, will pay 25 percent of the cost of a bulletproof vest 
for each of the 100,000 officer positions created in the crime bill. 
Also, the language in this bill takes into account that the new 
position being created may not necessarily expose the officer to the 
danger of gunfire. In this circumstance, the police agency being 
awarded the position may receive the 25-percent subsidy for another 
officer who is exposed to potential gunfire.
  There is strong public policy for this bill. According to Craig W. 
Floyd, chairman of the National Law Enforcement Officers Memorial Fund, 
he states ``the increased use of bullet-resistant vests by police 
officers appears to be the single biggest reason for the decline in 
death.'' The Federal Government owes a duty to help protect these 
officers that it is putting on the streets. By creating the 100,000 new 
positions, Congress created and assumed a new responsibility to help 
provide the safety for these individuals. This bill will demonstrate 
and establish that the officer's safety is a priority.
  If this bill did not exist, I believe that most local law enforcement 
agencies will still equip these new officers with the vests. What this 
bill will do is free-up money for the local law enforcement agency to 
spend on other needed equipment. For instance, the cost of patrol 
vehicles, uniforms and weapons stretch the already extended budgets.
  In my calculations, I estimated that the average cost of a vest is 
$550 dollars, 25 percent of this figure, the Federal Governments' 
contribution, is $138 per vest. the total cost would be about 
$14,000,000--$13,800,000. For this reason I am asking that $14,000,000 
be authorized for this program. This figure will be spread across 5 
years as the new officer positions are awarded.
  This bill has the support of the Fraternal Order of Police, the 
National Sheriffs' Association, International Union of Police 
Association and the Federal Law Enforcement Officers Association. Dewey 
R. Stokes, National President of the Fraternal Order of Police, states 
``With the congressional passage of this legislation, the Congress is, 
in fact, stating they are concerned about the protection of law 
enforcement officers, as well as recognizing the dangers we face on the 
violent streets of today's America.'' He further states ``The 25-
percent contribution by the Federal Government toward the purchase of 
these vests will surely encourage some of the more financially 
distressed police departments to make these purchases and thus save 
some additional officers' lives and prevent many possible serious 
injuries.''
  Although Federal officers would not benefit by this bill, this bill 
has the support of the Federal Law Enforcement Officers Association. 
Victor O'Boyski, president of the Federal Law Enforcement Officers 
Association, states ``we are endorsing this legislation as Federal Law 
Enforcement officers because we want safety ensured for the local 
officers who we work side-by-side with.'' Mr. President, this bill will 
make safety a priority.
  In summary, this bill allows us to fulfill an obligation. An 
obligation that was assumed when we created the 100,000 new officer 
positions in the crime bill. We must help our local law enforcement 
agencies provide protection for our officers. For these reasons, I ask 
colleagues to support this legislation.
  Mr. President, I ask unanimous consent that the text of the bill and 
additional material be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1972

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

     SECTION 1. BULLETPROOF VESTS FOR 100,000 POLICE OFFICERS.

       (a) Short Title.--This Act may be cited as the 
     ``Bulletproof Vest Police Safety Act of 1994''.
       (b) Grant Authorization.--Section 1701(b) of title I of the 
     Omnibus Crime Control and Safe Streets Act of 1968, as added 
     by section 103(a) of the Violent Crime Control and Law 
     Enforcement Act of 1993, is amended--
       (1) by striking ``and'' at the end of paragraph (1);
       (2) by striking the period at the end of paragraph (2) and 
     inserting ``; and''; and
       (3) by adding at the end the following new paragraph:
       ``(3) pay 25 percent of the cost of providing a number of 
     bulletproof vests equal to the number of law enforcement 
     officers hired or rehired with grant monies (for use by those 
     officers or other officers whose duties may expose them to 
     gunfire).''.
       (c) Allocation of Appropriations.--Section 1001(a)(11)(B) 
     of title I of the Omnibus Crime Control and Safe Streets Act 
     of 1968, as added by section 103(c) of the Violent Crime 
     Control and Safe Streets Act of 1993, is amended in the third 
     sentence by inserting ``(of which funds $14,000,000 shall be 
     available to provide assistance in purchasing bulletproof 
     vests under section 1701(b)(3))'' after ``specified in 
     section 1701(b)''.
                                  ____



                               National Sheriffs' Association,

                                   Alexandria, VA, March 24, 1994.
     Hon. Jeff Bingaman,
     U.S. Senate, 110 Hart Senate Office Building, Washington, DC.
       Dear Senator Bingaman: On behalf of the 22,000 members of 
     the National Sheriffs' Association (NSA), I am writing in 
     support of proposed legislation that would authorize grant 
     funds to pay for the cost of bulletproof vests for 100,000 
     police officers. The sheriffs of this nation applaud your 
     stand and commend you for your efforts. As always, NSA is 
     prepared to support legislation in the best interest of law 
     enforcement and the public.
       I would be grateful if you would keep me informed of any 
     progress regarding this proposal. Thank you for your 
     endeavors.
           Sincerely,
                                            Charles ``Bud'' Meeks,
                                               Executive Director.
                                  ____



                                    Fraternal Order of Police,

                                     Columbus, OH, March 22, 1994.
     Hon. Jeff Bingaman,
     U.S. Senate, Washington, DC.
       Dear Senator Bingaman: Your proposed legislation to assist 
     with the purchase of 100,000 vests for law enforcement 
     officers is a proposal that the National Fraternal Order of 
     Police would gladly support. With the Congressional passage 
     of this legislation, the Congress is, in fact, stating they 
     are concerned about the protection of law enforcement 
     officers, as well as recognizing the dangers we face on the 
     violent streets of today's America. The twenty-five percent 
     contribution by the Federal government toward the purchase of 
     these vests will surely encourage some of the more 
     financially distressed police departments to make these 
     purchases and thus save some additional officers' lives and 
     prevent many possible serious injuries.
       On behalf of our 248,000-plus members made up of full-time 
     law enforcement officers, we encourage you to pursue this 
     legislation and we thank you for your thoughtfulness and 
     consideration of our plight.
           Sincerely,
                                                  Dewey R. Stokes,

                                       National President.

                                 ______

      By Mr. BINGAMAN:
  S. 1973. A bill to authorize funds to pay a portion of the startup 
costs of local handgun exchange programs; to the Committee on the 
Judiciary.


                  handgun exchange program act of 1994

 Mr. BINGAMAN. Mr. President, today, I introduce legislation 
that will provide money for communities to start handgun exchange 
programs.
  The continuing question is how do we stop our youth from committing 
senseless acts of violence with handguns? There are no simple answers. 
Currently, in the fight against crime, Congress is faced with the 
difficult task of choosing between programs that show results in future 
decades or choosing programs that have more immediate impact. It has 
become clear that Government does not have all the answers and that is 
why there is currently greater emphasis placed on partnerships between 
the community, business, and Government.
  Today, I am offering legislation that strengthens the partnership 
between Government, business, and the community in taking handguns off 
the streets.
  This legislation will authorize the Attorney General to provide 50 
percent of the startup costs of a handgun exchange program in a 
community. Each State will be entitled to 2 percent of the total funds 
allocated for this program. This legislation will not pay for 
administration costs once the exchange program is under way and does 
not authorize funds to buy back handguns.
  The language in this bill defines a startup cost as pertaining to: 
First, informing the community of the program; second, getting 
businesses involved in the program and/or; third, securing a safe 
handgun exchange location. The Attorney General is authorized to 
determine whether the specific requests from the local communities 
abide by the intent of this definition.
  The purpose of this program is to get handguns off the street. 
Although there are current handgun exchange programs that do not have 
Government involvement, this legislation is intended to aid those 
communities that need help with coordination or information in 
developing their own programs.
  Let me illustrate to you what I mean by a Handgun Exchange Program. 
In my home State of New Mexico, Barry Finkenberg, a local business 
person who is president of Ticketmaster, started his own handgun 
exchange program. This program will exchange two tickets to an upcoming 
concert for one handgun. By January, in less than 3 months, the program 
had collected 130 guns. Mr. Finkenberg's example has inspired other 
programs to start in other States such as California and New York.
  This example demonstrates a successful partnership between the 
business sector and community in taking handguns off the streets. It 
also demonstrates that the Government does not have to buy back the 
handguns. Instead, a business person donates an item that can then be 
traded for the handguns. Concert tickets are only one of the incentives 
which have been donated. In other parts of the county, the business 
sector has donated toys, meals, certificates for clothing, tickets for 
sporting events, and even ski lift tickets.
  It is my belief, that there are communities that would create their 
own successful exchange programs such as that of Mr. Finkenberg if 
given the chance. It is for those areas of this country that this 
program is intended. This program will provide those communities with 
50 percent of the necessary funds needed to start their own programs. 
And as stated earlier, once the program is under way, the Department of 
Justice will stop any type of financial assistance. It is at this point 
that the success of the program depends upon the support and goodwill 
of the community to succeed.
  I am asking that $1 million be appropriated for both fiscal year 1994 
and 1995. No later than December 31, 1995, the Attorney General will 
submit a report to Congress that will assess the success of the 
program.
  In summary, this legislation will affect those communities that need 
help or aid in establishing their own handgun exchange programs. A 
partnership is forged that places more responsibility on the different 
partners at different times. In the beginning, Government has a 
significant role in creating the handgun exchange program. Once the 
program has started, business and the community assume the 
responsibility of the program's future success. For these reasons, I 
ask my colleagues to support this legislation.
  Mr. President I ask unanimous consent that the full text of the bill 
be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1973

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

     SECTION 1. STARTUP OR ``SEED MONEY'' FOR LOCAL HANDGUN 
                   EXCHANGE PROGRAMS.

       (a) Federal Contribution.--The Attorney General shall 
     establish a program under which the Attorney General will 
     enter into agreements to contribute, and will contribute, up 
     to 50 percent of the funds needed to pay startup costs of 
     handgun exchange programs operated by local governments or 
     private entities in which merchandise or services (including 
     entertainment), tickets or certificates that may be used to 
     acquire merchandise or services, or other non-cash incentives 
     are given in exchange for handguns.
       (b) Qualifications, Terms, and Conditions.--In an agreement 
     under subsection (a), the Attorney General--
       (1) may agree to contribute to the startup costs of a 
     handgun exchange an amount that is not greater than the 
     amount of State and local public funds and private funds 
     committed to the program at the time of the agreement;
       (2) shall require that the place at which exchanges are to 
     be made allows anonymity for a person who exchanges a 
     handgun;
       (3) shall require that all firearms that are turned in to 
     the program will be destroyed;
       (4) shall require that the program agree to provide only 
     merchandise or services (including entertainment), tickets or 
     certificates that may be used to acquire merchandise, or 
     other incentives other than cash to persons who turn in 
     firearms and that such incentives be provided by donations 
     from private entities;
       (5) shall require that startup costs must pertain to--
       (A) informing the community of the program;
       (B) getting businesses involved in the program; or
       (C) securing a safe handgun exchange location; and
       (6)(A) may set such other qualifications, terms, and 
     conditions as may be appropriate to ensure that the program 
     is operated in an efficient and bona fide manner consistent 
     with the interests of law enforcement; but
       (B) may not prescribe the terms under which the program 
     will accept firearms in exchange for any offered incentive.
       (c) Termination.--The program under subsection (a) shall 
     terminate on September 30, 1995.
       (d) Allocation.--
       (1) Maximum amount.--Not more than 2 percent of the total 
     amount appropriated to carry out this Act for a fiscal year 
     may be allocated to the making of contributions in any 1 
     State.
       (2) Priority.--Within each State--
       (A) the Attorney General shall give to priority to creating 
     handgun exchange programs in areas that are experiencing high 
     rates of crime in which handguns are used; but
       (B) urban and rural areas shall each receive an appropriate 
     amount of assistance.
       (e) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section, out of the 
     Violent Crime Reduction Trust Fund to be established under 
     section 1115 of title 31, United States Code, as proposed to 
     be added by section 1353 of the Violent Crime Control and Law 
     Enforcement Act of 1993, $1,000,000 for each of fiscal years 
     1994 and 1995.
       (f) Report.--Not later than December 31, 1995, the Attorney 
     General shall submit to Congress a report assessing the 
     effect that operation of the handgun exchange programs funded 
     under this Act has had in reducing the incidence of crime in 
     the jurisdictions in which the programs were operated
                                 ______

      By Mr. ROCKEFELLER (for himself, Mr. Murkowski, Mr. Graham, Mr. 
        Akaka, Mr. Daschle, Mr. Thurmond, Mr. Jeffords, Mr. Leahy, and 
        Mrs. Murray):
  S. 1974. A bill to authorize the Secretary of Veterans Affairs to 
conduct pilot programs in order to evaluate the feasibility of the 
participation of the Department of Veterans Affairs health care system 
in the health care systems of States that have enacted health care 
reform; to the Committee on Veterans Affairs.


                      va state health care reform

 Mr. ROCKEFELLER. Mr. President, even as the Congress carries 
on the debate on national health care reform, many states have already 
enacted reform legislation. These States have taken the first, 
important steps on the road to universal coverage. I applaud the 
efforts of these courageous legislators. They are giving their citizens 
health care security. These State plans provide Congress with the 
perfect opportunity to learn from their successes and to study the 
effects of reform on existing Federal medical programs, including the 
VA medical system.
  The VA medical system--the Nation's largest health care system--
cannot participate fully in health care reform efforts in specific 
States, because current Federal law makes it impossible for VA 
facilities to do so. This deprives VA of the kinds of experiences and 
information it needs to thrive under national health care reform. If 
this situation continues, we will miss a valuable opportunity to study 
the effects of reform.
  At a February 9, 1994, Senate Committee on Veterans' Affairs' hearing 
on VA participation in state health care reform programs, Acting Deputy 
Under Secretary of Health, Elwood Headley, M.D., stated that as a 
public health care system, VA lacks experience in participating in a 
competitive environment.
  Mr. President, I believe VA will do well in a national plan under 
which costs are controlled and coverage is expanded for all Americans, 
because VA already operates within a fixed budget. VA must, however, 
have the opportunity to learn what kinds of changes are needed in the 
VA medical system as a whole.
  It is in the spirit of improving VA medical services for veterans 
that I am today introducing a bill that would require VA to conduct a 
pilot health care reform program. This VA State Health Care Reform 
Pilot Program would enable VA to participate in the health care reform 
programs of several States. I am delighted to be joined in sponsoring 
this bill by Committee members Frank Murkowski, Bob Graham, Daniel 
Akaka, Tom Daschle, Strom Thurmond, and James Jeffords, and by Senators 
Patrick Leahy and Patty Murray.
  At the February 9 hearing, John Bollinger, Deputy Executive Director, 
Paralyzed Veterans of America, testified that ``the pilot programs will 
give VA in those States the opportunity to become a full participant in 
the health care system. It will also provide valuable experience to 
draw upon when the full VA system faces the same challenges in the 
context of national health care reform.'' I agree wholeheartedly.


                         summary of provisions

  Mr. President, this legislation would enable VA to evaluate the most 
appropriate means of participating in reformed State health care 
system, providing invaluable information to help them prepare for 
national health care reform.
  The bill would give VA the authority to select up to five States with 
comprehensive health benefit plans in place, or where such plans are 
imminent, to participate in the pilot program for a period of 2 years. 
The bill would authorize that VA facilities in the selected States 
offer free comprehensive care to all compensable service-connected 
veterans and to all veterans with incomes below the current levels that 
apply to inpatient care.
  The legislation would grant the Secretary authority to waive certain 
laws and regulations that could interfere with the ability of VA 
facilities to participate in State health care reform activities.
  This legislation would give VA medical center directors flexibility 
in allocating their resources, except with respect to regional 
programs, such as spinal cord injury services, post traumatic stress 
disorder, blind rehabilitation, and substance abuse programs, which are 
funded from Central Office.
  The bill would give the head of the VA in selected States--the VA 
health system director--the authority to contract out for medical 
services without prior review from VA Central Office. For other 
services, VA facilities within the State would have the authority to 
enter into contracts below $250,000 without prior review by Central 
Office. Contracts above $250,000 would be reviewed by Central Office, 
but would be automatically approved if Central Office did not make a 
decision within 30 days. This would give local VA facilities the 
autonomy they need to increase their number of providers in a timely 
manner.
  This bill would also give local VA facilities more flexibility in the 
hiring process, by extending authority that is currently available for 
hiring certain title 38 personnel to the hiring of all staff. This is 
intended to help VA facilities hire the best possible employees in a 
timely manner.
  The bill would exempt VA facilities in the pilot program from FTE 
cuts. Arbitrary FTE cuts could make it impossible for VA facilities to 
compete under health care reform.
  The legislation would give the participating VA facilities the 
authority to carry leftover funding over from 1 year to the next. 
Again, this would help VA facilities make better use of limited funds.
  Finally, this legislation would give VA the authority to collect 
employer contributions and other third-party payments for noncore 
veterans who choose VA health care. These payments would enable VA 
facilities to provide care for all veterans who choose VA health care, 
not just core veterans.


                               Conclusion

  Mr. President, VA needs legislative relief from restrictions in 
current law which, although enacted for good and appropriate reasons, 
could prevent VA facilities from competing as providers in certain 
States. The major obstacle which must be overcome is that VA facilities 
cannot qualify as providers under some State plans because of current 
eligibility requirements. Under various State proposals, all citizens 
would be eligible to choose a provider, and all providers must provide 
the same basic package of services. In most States, VA could not be 
considered a provider for several reasons, including the restrictions 
which limit preventive and primary care.
  Mr. President, the VA State Health Care Reform Pilot Program would 
provide VA with invaluable experience regarding how it needs to change 
in order to survive and thrive under health care reform. The VA State 
Health Care Reform Pilot Program will help us meet our obligation to 
the brave men and women who served in every branch of the armed forces, 
by improving the VA medical system that serves them.
  I am looking forward to working with Senator Murkowski and all the 
members on the Senate Committee on Veterans' Affairs, as well as my 
counterpart on the House Committee on Veterans' Affairs, Chairman Sonny 
Montgomery, and chairman of the House Subcommittee on Hospitals and 
Health Care Roy Rowland.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1974

       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 ``VA State Health Care Reform 
     Pilot Program Act''.

     SEC. 2. PURPOSE OF PILOT PROGRAMS.

       The purpose of this Act is to authorize the participation 
     of the Department of Veterans Affairs health care system in 
     the health care systems of States that have enacted health 
     care reform in order to evaluate the most appropriate means 
     of enabling the Department health care system to participate 
     in such systems and in the National health care system 
     contemplated under any plans for National health care reform.

     SEC. 3. HEALTH CARE PILOT PROGRAMS.

       (a) In General.--The Secretary may carry out pilot programs 
     on the participation of the Department of Veterans Affairs 
     health care system in the health care systems of States that 
     have adopted comprehensive health benefit plans. The 
     Secretary shall carry out any pilot program under this Act in 
     accordance with the provisions of this Act.
       (b) States Eligible for Designation.--(1) The Secretary 
     shall designate each of not more than five States as a 
     location for a pilot program under this Act. The Secretary 
     shall complete the designation of States as locations for 
     pilot programs not later than 30 days after the date of the 
     enactment of this Act.
       (2) The Secretary may designate a State as a location for a 
     pilot program under this Act if the Secretary determines 
     that--
       (A) the State has enacted, or will soon enact, a statute 
     establishing or providing for a comprehensive health benefit 
     plan; and
       (B) the participation of the health care system of the 
     Department under the plan is feasible and appropriate in 
     light of the purpose of this Act.
       (c) Department Participation in State Health Benefit 
     Plans--(1) To the maximum extent practicable, the Secretary 
     shall provide eligible persons under each pilot program under 
     this Act with the comprehensive package of basic health care 
     benefits that would otherwise be available to such persons 
     under the comprehensive health benefit plan of the State in 
     which the pilot program is carried out. The Secretary shall 
     provide such benefits through the health care system of the 
     Department in such State as if such system were a provider of 
     such benefits under such plan.
       (2) Notwithstanding any other provision of law, a State may 
     not prohibit the participation of the Department under the 
     comprehensive health benefit plan of the State under a pilot 
     program unless the chief executive officer of the State 
     certifies to the Secretary that--
       (A) the benefits to be provided by the Department under the 
     pilot program do not meet requirements for quality of 
     benefits established by or provided under the plan; or
       (B) the location of Department facilities (including 
     facilities providing services by contract or agreement with 
     the Secretary) in the State is such that the proximity of 
     eligible persons to such facilities does not meet 
     requirements so established for such proximity.
       (3) To the maximum extent practicable, the Secretary shall 
     provide health care benefits under a pilot program under this 
     Act in accordance with the statutory requirements and 
     regulatory requirements imposed with respect to the provision 
     and availability of such benefits under the comprehensive 
     health benefit plan of the State in which the pilot program 
     is carried out.
       (4) Not later than 30 days after the designation of a State 
     as a location for a pilot program under this Act, the 
     Secretary and the health system director for that State shall 
     jointly determine the Federal regulations the waiver or 
     modification of which is necessary in order to facilitate the 
     carrying out of the pilot program. Upon such determination, 
     the Secretary shall waive or modify the application of such 
     regulations to the pilot program.
       (5) The Secretary shall furnish any eligible person living 
     in a State in which a pilot program is carried out (including 
     any eligible person electing to receive benefits under the 
     pilot program and any eligible person not electing to receive 
     benefits under the pilot program) with the health care 
     benefits for which such person is eligible under chapter 17 
     of title 38, United States Code, notwithstanding that the 
     comprehensive package of basic health care benefits provided 
     under the comprehensive health benefit plan of the State does 
     not otherwise include such health care benefits. The 
     Secretary shall furnish any health care benefits under this 
     paragraph in accordance with the provisions of that chapter.
       (d) Health System Director.--The Secretary shall designate 
     a health system director for each State in which a pilot 
     program is carried out under this Act. The health system 
     director of a State shall be the director or chief of staff 
     of a Department medical center located in the State in which 
     the pilot program is carried out. To the maximum extent 
     practicable, the Secretary shall delegate to the health 
     system directors the responsibilities of the Secretary under 
     this Act.
       (e) Administrative Reorganization.--The Secretary may carry 
     out any administrative reorganization of an office, facility, 
     activity, or function of the health care system of the 
     Department in a State in which a pilot program is carried out 
     that the Secretary and the health system director jointly 
     determine to be necessary in order to facilitate the carrying 
     out of the pilot program. Section 510(b) of title 38, United 
     States Code, shall not apply to any such administrative 
     reorganization.
       (f) Provision of Benefits.--(1)(A) Except as provided in 
     subparagraph (B), the Secretary shall provide health care 
     benefits under a pilot program--
       (i) through the direct provision of such services by the 
     health care system of the Department in the State in which 
     the pilot program is carried out; or
       (ii) in the event that such services cannot be provided 
     directly by such system, by contract or other agreement in 
     accordance with paragraph (2).
       (B) The Secretary may exclude facilities of the Department 
     from participation in a pilot program. Any facilities so 
     excluded shall continue to provide health care benefits to 
     veterans and other persons eligible for such benefits in 
     accordance with the provisions of title 38, United States 
     Code.
       (2) The health system director of a pilot program may enter 
     into contracts and agreements for the provision of health 
     care services and contracts and agreements for other services 
     with respect to the pilot program under paragraph (1)(A)(ii). 
     Any such contract or agreement (including any lease) shall 
     not be subject to the following provisions of law:
       (A) Section 8110(c) of title 38, United States Code, 
     relating to contracting of services at Department health-care 
     facilities.
       (B) Section 8122(a)(1) of such title, relating to the lease 
     of Department property.
       (C) Section 8125 of such title, relating to local contracts 
     for the procurement of health-care items.
       (D) Section 702 of title 5, United States Code, relating to 
     the right of review of agency wrongs by courts of the United 
     States.
       (E) Sections 1346(a)(2) and 1491 of title 28, United States 
     Code, relating to the jurisdiction of the district courts of 
     the United States and the United States Court of Federal 
     Claims, respectively, for the actions enumerated in such 
     sections.
       (F) Subchapter V of chapter 35 of title 31, United States 
     Code, relating to adjudication of protests of violations of 
     procurement statutes and regulations.
       (G) Sections 3526 and 3702 of such title, relating to the 
     settlement of accounts and claims, respectively, of the 
     United States.
       (H) Subsections (b)(7), (e), (f), (g), and (h) of section 8 
     of the Small Business Act (15 U.S.C. 637(b)(7), (e), (f), 
     (g), and (h)), relating to requirements with respect to small 
     businesses for contracts for property and services.
       (I) The provisions of law assembled for purposes of 
     codification of the United States Code as section 471 through 
     544 of title 40 that relate to the authority of the 
     Administrator of General Services over the lease and disposal 
     of Federal Government property.
       (J) The Office of Federal Procurement Policy Act (41 U.S.C. 
     401 et seq.), relating to the procurement of property and 
     services by the Federal Government.
       (K) Chapter 3 of the Federal Property and Administrative 
     Services Act of 1949 (41 U.S.C. 251 et seq.), relating to the 
     procurement of property and services by the Federal 
     Government.
       (L) Office of Management and Budget Circular A-76.
       (3)(A) Notwithstanding any other provision of law, 
     contracts and agreements for the provision of health care 
     services under this subsection shall include contracts and 
     other agreements with insurers, health care providers, or 
     other individuals or entities that provide health care 
     services in order to obtain health-care resources for 
     eligible persons under a pilot program or to furnish health 
     care benefits to such persons.
       (B) A health system director of a pilot program may enter 
     into a contract or agreement under this paragraph only if the 
     director determines that the contract or agreement is 
     necessary in order to ensure the provision of health care 
     services of an acceptable level and quality under the pilot 
     program.
       (C) Contracts and agreements under this paragraph may be 
     entered into without prior review by the Central Office of 
     the Department.
       (4)(A) Contracts and agreements under this subsection for 
     services other than the services referred to in paragraph (3) 
     (including contracts and agreements for procurement of 
     equipment, maintenance and repair services, and other 
     services related to the provision of health care services) 
     shall not be subject to review by the Central Office if the 
     amount of such contracts or agreements is less than $250,000.
       (B) Contracts and agreements for services under this 
     paragraph shall be subject to review by the Central Office if 
     the amount of such contracts or agreements is $250,000 or 
     greater. If the Central Office fails to approve or reject a 
     contract or agreement under this clause within 30 days of its 
     submittal to the Central Office, such contract or agreement 
     shall be deemed approved by the Central Office.
       (g) Department Personnel.--(1) Notwithstanding any other 
     provision of law and to the extent necessary to carry out the 
     purpose of a pilot program, the Secretary may--
       (A) appoint health care personnel to positions in the 
     health care system of the Department in the State in which 
     the pilot program is carried out in accordance with such 
     qualifications for such positions as the Secretary may 
     establish; and
       (B) promote and advance personnel serving in such positions 
     in accordance with such qualifications as the Secretary may 
     establish.
       (2) Not later than 60 days after the designation of a State 
     as a location for a pilot program under this Act, or at such 
     other time as the Secretary may determine, the Secretary 
     shall request authority from the Director of the Office of 
     Management and Budget to permit the Secretary to employ a 
     number of full time equivalent employees in the health care 
     system of the Department in that State which exceeds the 
     number of such employees that would otherwise be authorized 
     for such employment by the Director.
       (3) Notwithstanding any other provision of law, employees 
     of the Department at facilities of the Department under a 
     pilot program shall not, during the carrying out of the pilot 
     program, be subject to any reduction in the number of full 
     time employees of the Department or as a result of a 
     reduction in the number of full time employees of the Federal 
     Government.
       (h) Eligible Persons.--(1) A person eligible for health 
     care benefits under a pilot program is any person residing in 
     a State in which a pilot program is carried out as follows:
       (A) Any veteran.
       (B) Any spouse or child of a veteran.
       (C) Any individual eligible for care under paragraph (2) or 
     (3) of section 1713(a) of title 38, United States Code.
       (2) Notwithstanding any other provision of law, a State may 
     not require that any person other than a person referred to 
     in paragraph (1) be eligible for health care benefits through 
     the Department under a pilot program.
       (i) Copayments and Other Charges.--(1) Except as provided 
     in paragraph (2), the Secretary may collect from or on behalf 
     of any individual receiving health care benefits from the 
     Secretary under a pilot program under this Act a premium, 
     deductible, copayment, or other charge with respect to the 
     provision of a benefit under the pilot program. The amount of 
     the premium, deductible, copayment, or other charge collected 
     with respect to a benefit provided under a pilot program may 
     not exceed the maximum amount otherwise permitted for a 
     premium, deductible, copayment, or other charge with respect 
     to that benefit under the comprehensive health benefits plan 
     of the State in which the pilot program is carried out.
       (2)(A) Except as provided in subparagraph (B), the 
     Secretary shall waive the collection under the pilot programs 
     of premiums, deductibles, copayments, and other charges with 
     respect to the benefits provided by the Department to the 
     following:
       (i) Veterans with compensable service-connected 
     disabilities.
       (ii) Veterans whose discharge or release from active 
     military, naval, or air service was for a compensable 
     disability that was incurred or aggravated in the line of 
     duty.
       (iii) Veterans who are in receipt of, or who, but for a 
     suspension pursuant to section 1151 of title 38, United 
     States Code (or both a suspension and the receipt of retired 
     pay), would be entitled to disability compensation, but only 
     to the extent that such veterans' continuing eligibility for 
     such care is provided for in the judgment or settlement 
     provided for in such section.
       (iv) Veterans who are a former prisoners of war.
       (v) Veterans of the Mexican border period or of World War 
     I.
       (vi) Veterans who are unable to defray the expenses of 
     necessary care, as determined in accordance with section 
     1722(a) of such title.
       (B) The Secretary may collect premiums, deductibles, 
     copyaments, and other charges with respect to benefits 
     provided under a pilot program to veterans referred to in 
     subparagraph (A) from any third party obligated to provide, 
     or to pay the expenses of, such benefits to or for such 
     veterans under the comprehensive health benefits plan of the 
     State in which the pilot program is carried out.
       (j) Funding.--(1) There is established in the Treasury a 
     fund to be known as the Department of Veterans Affairs Health 
     Care Reform Fund (hereafter referred to in this subsection as 
     the ``Fund'').
       (2)(A) Notwithstanding any other provision of law, amounts 
     shall be deposited in the Fund as follows:
       (i) Amounts made available to a pilot program based upon a 
     determination under paragraph (3).
       (ii) Amounts collected under a pilot program in accordance 
     with subsection (i).
       (iii) Amounts determined with respect to a pilot program 
     under paragraph (4).
       (iv) Such other amounts as the Secretary and the health 
     system directors of the pilot programs jointly determine to 
     be necessary in order to carry out the pilot programs.
       (v) Such other amounts as may be appropriated to the pilot 
     programs.
       (B) The Secretary shall make available amounts under 
     clauses (i) and (iv) of subparagraph (A) from amounts 
     appropriated to the Department of Veterans Affairs for the 
     provision of health care services.
       (C) The Secretary shall establish and maintain a separate 
     account under the Fund for each pilot program carried out 
     under this Act. Any deposits and expenditures with respect to 
     a pilot program shall be made to or from the account 
     established and maintained with respect to that pilot 
     program.
       (3)(A) For each year of the operation of a pilot program 
     under this Act, the Secretary shall deposit in account of the 
     Fund for the pilot program an amount (as determined by the 
     Secretary) equal to the amount that would otherwise be made 
     available to the health care system of the Department in the 
     State in which the pilot program is carried out for the 
     payment of the cost of health care services by such system in 
     that State in that year. The Secretary shall deposit such 
     amount at the beginning of such year.
       (B) The costs referred to in subparagraph (A) shall not 
     include costs relating to the provision by the Secretary of 
     the following services:
       (i) Services relating to post-traumatic stress disorder.
       (ii) Services relating to spinal-cord injuries.
       (iii) Services relating to substance abuse.
       (iv) Services relating to the rehabilitation of blind 
     veterans.
       (4)(A) In each year of the operation of a pilot program 
     under this Act, the Secretary shall deposit into the account 
     of the Fund for the pilot program an amount with respect to 
     the pilot program that is equal to the portion of the amount 
     referred to in subparagraph (B) that is allocable to the 
     medical-care cost recovery activities of the Department under 
     section 1729(g)(4) of title 38, United States Code, in the 
     State in which the pilot program is carried out.
       (B) The amount referred to in subparagraph (A) is the 
     amount by which the unobligated balance in the Department of 
     Veterans Affairs Medical-Care Cost Recovery Fund for the year 
     preceding the date of the deposit under this paragraph 
     exceeds the estimated amount of such unobligated balance at 
     the commencement of such preceding year.
       (C) The Secretary shall make deposits under this paragraph 
     at the same time as the deposit under such section.
       (5)(A) Notwithstanding any other provision of law, the 
     health system director for a State in which a pilot program 
     is carried out shall determine the costs for which amounts in 
     the Fund may be expended in carrying out the pilot program.
       (B)(i) Except as provided in clause (ii), the costs of 
     carrying out a pilot program under this paragraph shall 
     include any costs of marketing and advertising under the 
     program and costs relating to acquisition (including 
     acquisition of land), construction, repair, or renovation of 
     facilities.
       (ii) Costs under this subparagraph shall not include any 
     costs relating to a major medical facility project or a major 
     medical facility lease as such terms are defined in 
     subparagraphs (A) and (B) of section 8104(a)(3) of title 38, 
     United States Code, respectively.
       (C) Amounts in the Fund for the payment of costs of a pilot 
     program under this subsection shall be available for such 
     purpose without fiscal year limitation.
       (k) Termination.--A pilot program carried out under this 
     Act shall terminate not later than 2 years after the date of 
     the commencement of provision of benefits under the pilot 
     program.

     SEC. 4. REPORTS ON PILOT PROGRAMS.

       (a) Collection of Information.--(1) The Secretary shall 
     collect such information with respect to the provision of 
     health care benefits under each pilot program as is necessary 
     to permit the Secretary to evaluate the pilot program in 
     light of the purpose of the pilot program under this Act.
       (2) The information collected by the Secretary under 
     paragraph (1) shall include aggregated data on the following:
       (A) The number of persons participating in each pilot 
     program, including the age, sex, health status, disability 
     ratings (if any), employment status, and incomes of such 
     persons.
       (B) The nature of benefits sought by such persons under 
     each pilot program.
       (C) The nature and quantity of benefits provided to such 
     persons under each pilot program.
       (D) The cost to the Department of providing such benefits 
     under each pilot program.
       (b) Reports.--(1) Not later than 14 months after the date 
     of the completion of the designation of States as locations 
     for pilot programs under this Act, the Secretary shall submit 
     to the Committees on Veterans' Affairs of the Senate and 
     House of Representatives a report on the progress of the 
     Secretary in carrying out the pilot programs. Such report 
     shall include the information referred to in subsection 
     (a)(2) on the date of the report.
       (2) Not later than November 30 of the year of the 
     termination of the final pilot program under this Act, the 
     Secretary shall submit to the committees referred to in 
     paragraph (1) a report on the pilot programs carried out 
     under this Act. The report shall include the following:
       (A) The information referred to in subsection (a)(2), 
     together with the comments and conclusions of the Secretary 
     with respect to such information.
       (B) An assessment by the Secretary of the utility of each 
     pilot program for carrying out the purpose of this Act.
       (C) An assessment by the Secretary of appropriate means of 
     integrating the health care system of the Department into the 
     health care systems of States that have enacted health care 
     reform and into the National health care system contemplated 
     under any plans for National health care reform.
       (D) Such other information, assessments, and conclusions as 
     the Secretary considers appropriate.

     SEC. 5. DEFINITIONS.

       For the purposes of this Act--
       (1) The terms ``Secretary'', ``Department'', ``veteran'', 
     ``child'' and ``spouse'' have the meanings given such terms 
     in paragraphs (1), (2), (4), and (31) of section 101 of title 
     38, United States Code, respectively.
       (2) The term ``comprehensive health benefit plan'', in the 
     case of a State, means a plan or system established under the 
     law of the State that--
       (A) ensures the access of all residents of the State to a 
     comprehensive package of basic health care benefits; and
       (B) ensures such access by providing that such benefits 
     shall be provided directly or by contract by public and 
     private entities.
       (3) The term ``comprehensive package of basic health care 
     benefits'' means the health care benefits provided for by a 
     State under the comprehensive health benefit plan of the 
     State.
       (4) The term ``health care system of the Department'', in 
     the case of a State designated as a location for a pilot 
     program, means the facilities and personnel of the Department 
     located in that State that provide health care services under 
     chapter 17 of title 38, United States Code.

 Mr. LEAHY. Mr. President, I would like to thank Senator 
Rockerfeller and the other members of the Senate Veterans Committee for 
their foresight in understanding that the VA will need to change to 
survive under health care reform.
  Last fall, President Clinton announced his plan to guarantee private 
insurance coverage to every American. This marked the beginning of a 
continuing debate on how all Americans receive health care in the 
future.
  The President's plan offers the VA a great opportunity to improve its 
services to America's veterans and compete in the next century. 
However, as our country continues the debate on health care reform, it 
is important that we not forget that some States have already passed 
health care reform legislation and others are on the verge of doing so. 
This bill addresses a very big concern that VA hospitals not be left 
behind as States move ahead.
  For example, my home State of Vermont has been a national leader in 
health care reform. Just yesterday, the Vermont House passed and sent 
to the Senate its health care reform legislation. I believe that the VA 
hospital in White River Junction, VT, needs to be able to work with the 
State before the final legislation is set. It should be in on the 
ground floor of this State legislation so that it can participate fully 
and compete with other health care providers in the State, rather than 
as an afterthought, when national health care reform is passed.
  This bill will give VA facilities in States that are ahead of the 
health care curve the flexibility to participate in State health care 
reform. This flexibility not only is important to the VA hospitals in 
these States, but it also is important to the VA hospital systems as a 
whole. By doing this we will be able to learn how the VA needs to 
change to survive under health care reform.
                                 ______

      By Ms. MOSELEY-BRAUN (for herself, Mr. Kennedy, Mr. Sasser, Mr. 
        Mathews, Mr. Sarbanes, Mr. Moynihan, and Mr. Cochran):
  S. 1975. A bill to establish a grant program to restore and preserve 
historic buildings at historically black colleges and universities, and 
for other purposes; to the Committee on Energy and Natural Resources.


         historically black Colleges building preservation act

  Ms. MOSELEY-BRAUN. Mr. President, I rise today to introduce the 
Historically Black Colleges and Universities Historic Building 
Restoration and Preservation Act, legislation designed to protect some 
of our Nation's most important historic landmarks which are at risk of 
being lost forever.
  Mr. President, this legislation is cosponsored by Senators Kennedy, 
Sasser, Mathews, Sarbanes, Moynihan, and Cochran, and endorsed by the 
United Negro College Fund.
  Our Nation's historically black colleges and universities have 
promoted academic excellence for over 130 years.
  As stated so eloquently in Fisk University's original charter, 
historically black colleges and universities have measured themselves 
by the highest standards, not of Negro education, but of American 
education at its best.
  Throughout their history, historically black colleges and 
universities have produced some of our Nation's most distinguished 
leaders including: Dr. Martin Luther King Jr., 17 current Members of 
Congress, and my colleague from Pennsylvania, Senator Harris Wofford.
  Yet, these institutions have distinguished themselves in the field of 
higher education over the years by maintaining the highest academic 
standards while increasing educational opportunities for economically 
and socially disadvantaged Americans--including tens of thousands of 
African-Americans.
  Although they only represent 3 percent of all U.S. institutions of 
higher learning, historically black colleges and universities graduate 
33 percent of all African-Americans with bachelor's degrees and 43 
percent of all African-Americans who go on to earn their Ph.D.'s.
  Nonetheless, in order to meet the educational needs of these 
promising individuals, these schools have had to keep their tuition and 
fees well below those at comparable institutions.
  In 1990-91, for example, the average tuition and fees charged by 
private historically black colleges and universities was $4,657--less 
than half the $9,351 average charged by private colleges nationwide.
  Moreover, historically black colleges and universities have also had 
to keep their costs low in order to increase financial aid for their 
students, who are disproportionately more dependent on financial aid 
than students at other U.S. colleges.
  A study conducted by the United Negro College Fund [UNCF] found that 
90 percent of students at private historically black colleges and 
universities require financial aid compared with 65 percent of private 
college students nationally.
  The study also found that nearly one-half of these students come from 
families earning under $25,000.
  Mr. President, given that historically black colleges and 
universities have found it increasingly difficult to support student 
aid, it should not be surprising that they are unable to restore and 
preserve the historic landmarks which sit on their campuses.
  The Historically Black Colleges and Universities Historic 
Preservation and Restoration Act I am introducing today addresses this 
problem by authorizing the Secretary of the Interior to allocate $20 
million in fiscal year 1995 and $15 million in fiscal years 1996 
through 1998 for the restoration and preservation of historic buildings 
on the campuses of historically black colleges and universities.
  More specifically, this legislation would support the Department of 
the Interior's Historically Black Colleges and Universities Historic 
Preservation initiative.
  In 1992, the Department of the Interior along with the National Park 
Service and the American Gas Association began a campaign to identify 
the most significant and physically threatened historic landmarks at 
historically black colleges and universities.
  After a comprehensive review, the Interior Department selected 11 
architecturally and culturally significant historic landmarks for its 
historic preservation initiative. These historic landmarks include:
  Walter B. Hill at Savannah State College, Which served as a library 
for blacks when they were denied access to the public library; Virginia 
Hall, the first permanent structure at Hampton University, which was 
established to educate newly freed slaves; and Loockerman Hall at 
Delaware State College, which is widely believed to have been a stop on 
the underground railroad.
  Mr. President, this legislation would also support the restoration of 
the Administration Building at Fisk University in Nashville, TN, which 
was designed by Moses and Calvin McKissack, two of America's earliest 
black architects, and which houses a series of murals painted by Harlem 
renaissance painter Arron Douglas.
  Mr. President, the United Negro College Fund has agreed to supplement 
these Federal funds in order to protect these historic landmarks that 
symbolize the hope of the civil rights struggle and the contributions 
that historically black colleges and universities have in the education 
of our Nation's citizens.
  Mr. President, I would like to conclude my remarks by urging my 
colleagues to support the Historically Black Colleges and Universities 
Historic Building Restoration and Preservation Act and by reminding 
them that when Thurgood Marshall was refused admittance to the 
University of Maryland Law School because of the color of his skin, it 
was an historically black university that prepared him for the Supreme 
Court.
  Mr. President. I ask unanimous consent that a copy of the 
Historically Black Colleges and Universities Historic Building 
Restoration and Preservation Act be included in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1975

       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 ``Historically Black Colleges 
     and Universities Historic Building Restoration and 
     Preservation Act''.

     SEC. 2. DEFINITIONS.

       For the purposes of this Act--
       (1) the term ``historically black colleges and 
     universities'' has the same meaning given the term ``part B 
     institution'' in section 322(2) of the Higher Education Act 
     of 1965 (20 U.S.C. 1061(2)); and
       (2) the term ``historic building and structures'' means a 
     building or structure that is listed on the National Register 
     of Historic Places or is designated as a National Historic 
     Landmark.

     SEC. 3. FINDINGS.

       Congress finds that--
       (1) the Nation's historically black colleges and 
     universities have contributed significantly to the effort to 
     attain equal opportunity through postsecondary education for 
     African-American, low-income, and educationally disadvantaged 
     Americans;
       (2) over the course of our Nation's history, the Federal 
     Government and the States have discriminated in the 
     allocation of land and financial resources to support the 
     institutions, forcing them to rely on the generous support of 
     private individuals and other charitable organizations;
       (3) the development of private and charitable financial 
     support for historically black colleges and universities has 
     resulted in structures and buildings of historic importance 
     and architecturally unique design on the campuses of these 
     institutions; and
       (4) many of the structures and buildings at historically 
     black colleges and universities are national treasures worthy 
     of preservation and restoration for future generations of all 
     Americans and for the students and faculty of the 
     institutions.

     SEC. 4. PRESERVATION AND RESTORATION GRANTS FOR HISTORIC 
                   BUILDINGS AT HISTORICALLY BLACK COLLEGES AND 
                   UNIVERSITIES.

       (a) Authority To Make Grants.--In fiscal years 1995 through 
     1998, the Secretary of the Interior (referred to in this Act 
     as the ``Secretary'') shall make grants in accordance with 
     this section to historically black colleges and universities 
     for the preservation and restoration of historic buildings 
     and structures on the campus of the institutions.
       (b) Grant Conditions.--Grants made pursuant to this section 
     shall be subject to the condition that the grantee covenants, 
     for a period of time specified by the Secretary that--
       (1) no alteration shall be made to the property with 
     respect to which the grant is made without the concurrence of 
     the Secretary; and
       (2) reasonable public access to the property with respect 
     to which the grant is made shall be permitted by the grantee 
     for interpretive and educational purposes.
       (c) Matching Requirement For Buildings and Structures 
     Listed on The National Register of Historic Places.--
       (1) In general.--Except as provided in paragraph (2), the 
     Federal share of a grant under this section for a building or 
     structure listed on the National Register of Historic Places 
     shall be not more than 50 percent of the cost of the grant 
     project.
       (2) Exception.--The Secretary may waive the cost-sharing 
     requirement for a grant under this subsection if the 
     Secretary determines that an extreme emergency exists or that 
     a waiver is in the public interest to ensure the preservation 
     of historically significant resources.
       (d) Funding.--
       (1) Source.--The Secretary shall make grants pursuant to 
     this section from amounts made available to carry out the 
     National Historic Preservation Act of 1966 (16 U.S.C. 470 et 
     seq.)
       (2) Limitations.--
       (A) Fiscal year 1995.--For fiscal year 1995--
       (i) not more than $20,000,000 may be made available for a 
     grant under this section; and
       (ii) of such amounts--
       (I) $5,000,000 shall be made available for grants to Fisk 
     University; and
       (II) $10,000,000 shall be made available for grants to 
     historically black colleges and universities identified for 
     inclusion in the Department of the Interior Historically 
     Black College and University Historic Preservation 
     Initiative.
       (B) Subsequent years.--For each of fiscal years 1996, 1997, 
     and 1998, not more than $15,000,000 may be made available for 
     grants under this section.
       (e) Regulations.--The Secretary shall develop and implement 
     regulations to carry out this Act.
                                 ______

      By Mr. DODD (for himself, Mr. Dorgan, Mr. Domenici, Ms. Mikulski, 
        Mr. Johnston and Mr. Faircloth):
  S. 1976. A bill to amend the Securities Exchange Act of 1934 to 
establish a filing deadline and to provide certain safeguards to ensure 
that the interests of investors are well protected under the implied 
private action provisions of the act; to the Committee on Banking, 
Housing, and Urban Affairs.


                private securities litigation reform act

  Mr. DODD. Mr. President, I rise today to introduce the Private 
Securities Litigation Reform Act of 1994. I am joined by my colleague 
Senator Domenici who has worked closely with me in crafting this 
important initiative.
  Securities lawsuits brought by private individuals are critical to 
ensuring the integrity of our capital markets. As an important back-up 
to Government enforcement actions, these private actions help deter 
wrongdoing. When the system is working well, it helps to ensure that 
corporate officers, auditors, directors, lawyers and others properly 
perform their jobs. Private litigation is an indispensable tool with 
which defrauded investors can recover their losses without having to 
rely on Government action.
  By performing these functions, private lawsuits should promote 
investor confidence and capital formation. The success of the American 
securities markets is due to the fact that investors here and abroad 
trust out markets to be fundamentally clean and fair. That trust stems 
in part from the SEC's role and in part from defrauded investors' 
ability to take direct action.
  Private securities litigation has evolved over the years mainly as a 
result of court decisions rather than legislative action. For example, 
the most important private right of action for defrauded investors has 
long been section 10(B) of the Securities Exchange Act. Private actions 
under that provision were never expressly set out by Congress, but have 
been construed and refined by courts, with the tacit consent of 
Congress.
  This lack of congressional involvement in shaping the contours of 
private litigation has created uncertainty about legal standards and 
unwarranted opportunities for abuse of investors and companies. Last 
summer, my securities subcommittee had several days of hearing. These 
hearings documented a number of glaring problems with the current 
system.
  First, securities class action cases are vulnerable to abuses by 
entrepreneurial lawyers who put their own interests ahead of their 
clients. Many critics charge that plaintiffs' attorneys appear to 
control the settlement of the case with little or no influence from 
either the named plaintiffs or the larger class of investors.
  For example, in one case which was cited to the subcommittee by a 
lawyer as a showcase of how the system works, the case was settled 
before trial for $33 million. The lawyers asked the court for more than 
$20 million of that amount in fees and costs. The court awarded the 
plaintiffs' lawyers over $11 million and lawyers for the company $3 
million. Investors recovered only 6.5 percent of their recoverable 
damages. In a case which is now pending, the plaintiffs' lawyers are 
seeking $11 million from a $33 million settlement for their Federal 
securities law claims, and another $8 million out of a $12 million 
settlement of related State law claims.
  A second area of abuse is frivolous litigation. We have heard 
complaints from companies, especially in the high technology sectors, 
that they face groundless securities litigation days or even hours 
after adverse earnings announcements. Courts have echoed this concern. 
As the Supreme Court pointed out in Blue Chip Stamps versus Manor Drug 
Store:

       [I]n the field of federal securities laws governing 
     disclosure of information, even a complaint which by 
     objective standards may have very little success at trial has 
     a settlement value to the plaintiff out of any proportion to 
     its prospect of success at trial so long as he may prevent 
     the suit from being resolved against him by dismissal or 
     summary judgment. The very pendency of the lawsuit may 
     frustrate or delay normal business activity of the defendant 
     which is totally unrelated to the lawsuit.

  Some have also suggested that the net effect of private litigation 
under the Federal securities laws has been to weaken the financial 
disclosure system on which our capital markets depend. The accounting 
profession, which is at the heart of the financial disclosure system, 
has warned that because of the doctrine of joint and several liability, 
accountants face potential liability which could destroy the ability of 
independent auditors to review financial disclosure by companies.
  The position in which the accounting profession now finds itself 
might be likened to the crisis which civil engineers might face if an 
epidemic of bridge and building collapses occurred because of a 
combination of design flaws, inadequate quality control checks and 
other professional failings, coupled with fraudulent practices by some 
construction contractors, and if virtually all engineers faced 
potential personal liability for the role of their firms in these 
disasters.
  It seems clear that the best public policy toward the civil 
engineering profession in such a situation would be to take steps to 
develop a better system for identifying and dealing with poor 
engineering practices and poor engineers, while at the same time taking 
steps to encourage capable engineers to continue designing bridges and 
buildings. In my view, it would be poor public policy to strangle the 
civil engineering profession by threatening many or most civil 
engineers with personal bankruptcy even if they were personally 
blameless. The only rational approach would be to insist on major 
changes in the profession as well as sufficient relief from liability 
to ensure the profession's future viability.


                         legislative solutions

  The bill contains three major initiatives to deal with these 
problems:
  First, it empowers investors so that they--not their lawyers--have 
greater control over class action cases; it limits opportunities for 
frivolous litigation; and it rationalizes the professional liability of 
accountants in exchange for stronger regulation.
  In addition, the bill incorporates measures previously proposed in 
Congress to strengthen the obligation of auditors to search for fraud 
and to lengthen the statute of limitations for fraud actions.
  First, empowering investors: The bill addresses abuses of investors 
by their lawyers by ensuring that investors, not lawyers, decide 
whether to bring a case, whether to settle, and how much the lawyers 
should receive.
  The bill requires courts to appoint a plaintiff steering committee or 
a guardian to directly control lawyers for the class.
  The bill requires that notices of settlement agreements sent to 
investors spell out clearly important facts such as how much investors 
are giving up by settling, and how much their lawyers will receive in 
the settlement.
  The bill requires that courts tie awards of lawyers' fees directly to 
how much is recovered by investors, rather than simply how many hours 
the lawyers billed or how many pages of briefs they filed.
  The bill establishes an alternative dispute resolution procedure to 
make it easier to prosecute a case without the necessity of slow and 
expensive federal court proceedings. This idea is very similar to a 
provision in the products liability bill passed by the Commerce 
Committee last fall, and like that bill it is intended to speed up the 
recovery process for plaintiffs who have strong cases.
  These reform provisions should ensure that defrauded investors are 
not cheated a second time. It also should help victims of fraud to 
recover damages more quickly, with less of their recovery drained off 
in lawyers' fees.
  Second, frivolous litigation: The bill requires that in order to 
bring a securities case as a class action, the plaintiffs in whose name 
the case is brought must have held either 1 percent of the securities 
which are the subject of the litigation or $10,000 worth of securities. 
This should help stop a problem pointed to by several courts in which 
professional plaintiffs who own small amounts of stock in many 
companies try to bring class action lawsuits whenever one of their 
investments goes down.
  The bill clarifies how a lawyer should plead a securities fraud 
claim. Plaintiffs' lawyers should have no trouble meeting these 
standards if they have legitimate cases and have looked at the facts.
  These and other reforms should end the race to the courthouse by 
lawyers eager to file a case without investigating the facts or finding 
a real client.
  Third, securities litigation and financial reporting: The accounting 
profession has argued that accounting firms are unfairly singled out 
under the current litigation system simply because they are a deep 
pocket. They claim that their liability exposure under the current 
system could drive them away from providing auditing services to many 
companies, especially new companies and high-technology companies.
  The bill establishes a liability system for less culpable defendants 
that is linked to degree of fault. At the same time, the bill 
establishes a self-disciplinary organization for accountants under the 
direct supervision of the SEC. This entity would be somewhat like self-
regulatory organizations such as the New York Stock Exchange or the 
National Association of Securities Dealers. The net effect should be a 
more direct and rational way of dealing with bad apples in the 
accounting profession without punishing the entire profession.
  Fourth, enhancing deterrence of fraud: The bill would extend the 
statute of limitations for implied actions to 5 years from the date of 
the violation, or 2 years after the violation was discovered or should 
have been discovered through the exercise of reasonable diligence. The 
bill also incorporates pending legislation concerning the 
responsibility of auditors to search for and report fraud. A similar 
bill in the house is supported by the SEC and the AICPA.
  The U.S. securities markets have achieved an unparalleled success 
under a blend of Government oversight buttressed by private litigation. 
However, as we look toward the 21st century, we must not be complacent 
about that long-running American economic strength. The investing 
public deserves a system of private remedies which offers better 
protection to investors rather than promoting a wasteful and 
ineffective litigation sub-culture. If we can accomplish this, we will 
strengthen investor confidence and ensure our securities market's 
continued success.
  Mr. President, I ask unanimous consent that this bill and an 
explanation of selected bill provisions be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1976

       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 ``Private 
     Securities Litigation Reform Act of 1994''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                 TITLE I--PRIVATE SECURITIES LITIGATION

Sec. 101. Elimination of certain abusive practices.
Sec. 102. Alternative dispute resolution procedure; time limitation on 
              private rights of action.
Sec. 103. Plaintiff steering committees.
Sec. 104. Requirements for securities fraud actions.
Sec. 105. Amendment to Racketeer Influenced and Corrupt Organizations 
              Act.

                     TITLE II--FINANCIAL DISCLOSURE

Sec. 201. Safe harbor for forward-looking statements.
Sec. 202. Fraud detection and disclosure.
Sec. 203. Proportionate liability and joint and several liability.
Sec. 204. Public Auditing Self-Disciplinary Board.
                 TITLE I--PRIVATE SECURITIES LITIGATION

     SEC. 101. ELIMINATION OF CERTAIN ABUSIVE PRACTICES.

       (a) Receipt for Referral Fees.--Section 15(c) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78o(c)) is amended 
     by adding at the end the following new paragraph:
       ``(7) Receipt of referral fees.--No broker or dealer, or 
     person associated with a broker or dealer, may solicit or 
     accept remuneration for assisting an attorney in obtaining 
     the representation of any customer in any implied private 
     action arising under this title.''.
       (b) Prohibition on Attorneys' Fees Paid From Commission 
     Disgorgement Funds.--Section 21(d) of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78u(d)) is amended by adding at the 
     end the following new paragraph:
       ``(4) Prohibition on attorneys' fees paid from commission 
     disgorgement funds.--Except as otherwise ordered by the 
     court, funds disgorged as the result of an action brought by 
     the Commission in Federal court, or of any Commission 
     administrative action, shall not be distributed as payment 
     for attorneys' fees or expenses incurred by private parties 
     seeking distribution of the disgorged funds.''.
       (c) Additional Provisions Applicable to Class Actions.--
     Section 21 of the Securities Exchange Act of 1934 (15 U.S.C. 
     78u) is amended by adding at the end the following new 
     subsections:
       ``(i) Recovery by Named Plaintiffs in Class Actions.--In an 
     implied private action arising under this title that is 
     certified as a class action pursuant to the Federal Rules of 
     Civil Procedure, the share of any final judgment or of any 
     settlement that is awarded to class plaintiffs serving as the 
     representative parties shall be calculated in the same manner 
     as the shares of the final judgment or settlement awarded to 
     all other members of the class. Nothing in this subsection 
     shall be construed to limit the award to any representative 
     parties of reasonable compensation, costs, and expenses 
     (including lost wages) relating to the representation of the 
     class.
       ``(j) Conflicts of Interest.--In an implied private action 
     arising under this title that is certified as a class action 
     pursuant to the Federal Rules of Civil Procedure, if a party 
     is represented by an attorney who directly owns or otherwise 
     has a beneficial interest in the securities that are the 
     subject of the litigation, the court shall make a 
     determination of whether such interest constitutes a conflict 
     of interest sufficient to disqualify the attorney from 
     representing the party.
       ``(k) Restrictions on Settlements Under Seal.--In an 
     implied private action arising under this title that is 
     certified as a class action pursuant to the Federal Rules of 
     Civil Procedure, the terms and provisions of any settlement 
     agreement between any of the parties shall not be filed under 
     seal, except that on motion of any of the parties to the 
     settlement, the court may order filing under seal for those 
     portions of a settlement agreement as to which good cause is 
     shown for such filing under seal. Good cause shall only exist 
     if publication of a term or provision of a settlement 
     agreement would cause direct and substantial harm to any 
     person.
       ``(l) Restrictions on Payment of Attorneys' Fees From 
     Settlement Funds.--In an implied private action arising under 
     this title that is certified as a class action pursuant to 
     the Federal Rules of Civil Procedure, attorneys' fees awarded 
     by the court to counsel for the class shall be determined as 
     a percentage of the amount of damages and prejudgment 
     interest actually paid to the class as a result of the 
     attorneys' efforts. In no event shall the amount awarded to 
     counsel for the class exceed a reasonable percentage of the 
     amount recovered by the class plus reasonable expenses.
       ``(m) Disclosure of Settlement Terms to Class Members.--In 
     an implied private action arising under this title that is 
     certified as a class action pursuant to the Federal Rules of 
     Civil Procedure, a proposed settlement agreement that is 
     published or otherwise disseminated to the class shall 
     include the following statements, which shall not be 
     admissible for purposes of any Federal or State judicial or 
     administrative proceeding:
       ``(1) Statement of potential outcome of case.--
       ``(A) Agreement on amount of damages and likelihood of 
     prevailing.--If the settling parties agree on the amount of 
     damages per share that would be recoverable if the plaintiff 
     prevailed on each claim alleged under this title and the 
     likelihood that the plaintiff would prevail--
       ``(i) a statement concerning the amount of such potential 
     damages; and
       ``(ii) a statement concerning the probability that the 
     plaintiff would prevail on the claims alleged under this 
     title and a brief explanation of the reasons for that 
     conclusion.
       ``(B) Disagreement on amount of damages or likelihood of 
     prevailing.--If the parties do not agree on the amount of 
     damages per share that would be recoverable if the plaintiff 
     prevailed on each claim alleged under this title or on the 
     likelihood that the plaintiff would prevail on those claims, 
     or both, a statement from each settling party concerning the 
     issue or issues on which the parties disagree.
       ``(C) Inadmissibility for certain purposes.--Statements 
     made in accordance with subparagraphs (A) and (B) shall not 
     be admissible for purposes of any Federal or State judicial 
     or administrative proceeding.
       ``(2) Statement of attorneys' fees or costs sought.--If any 
     of the settling parties or their counsel intend to apply to 
     the court for an award of attorneys' fees or costs from any 
     fund established as part of the settlement, a statement 
     indicating which parties or counsel intend to make such an 
     application, the amount of fees and costs that will be 
     sought, and a brief explanation of the basis for the 
     application.
       ``(3) Identification of representatives.--The name, 
     telephone number, and address of one or more representatives 
     of counsel for the plaintiff class who will be reasonably 
     available to answer questions from class members concerning 
     any matter contained in any notice of settlement published or 
     otherwise disseminated to class members.
       ``(4) Other information.--Such other information as may be 
     required by the court, or by any guardian ad litem or 
     plaintiff steering committee appointed by the court pursuant 
     to section 38.
       ``(n) Special Verdicts.--In an implied private action 
     arising under this title in which the plaintiff may recover 
     money damages only on proof that a defendant acted with a 
     particular state of mind, the court shall, when requested by 
     a defendant, submit to the jury a written interrogatory on 
     the issue of each such defendant's state of mind at the time 
     the alleged violation occurred.
       ``(o) Named Plaintiff Threshold.--In an implied private 
     action arising under this title, in order for a plaintiff or 
     plaintiffs to obtain certification as representatives of a 
     class of investors pursuant to the Federal Rules of Civil 
     Procedure, the plaintiff or plaintiffs must show that they 
     owned, in the aggregate, during the time period in which 
     violations of this title are alleged to have occurred, not 
     less than the lesser of--
       ``(1) 1 percent of the securities which are the subject of 
     the litigation; or
       ``(2) $10,000 (in market value) of such securities.''.

     SEC. 102. ALTERNATIVE DISPUTE RESOLUTION PROCEDURE; TIME 
                   LIMITATION ON PRIVATE RIGHTS OF ACTION.

       (a) Recovery of Costs and Attorneys' Fees.--The Securities 
     Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by 
     adding at the end the following new section:

     ``SEC. 36. ALTERNATIVE DISPUTE RESOLUTION PROCEDURE.

       ``(a) In General.--
       ``(1) Offer to proceed.--Except as provided in paragraph 
     (2), in an implied private action arising under this title, 
     any party may, before the expiration of the period permitted 
     for answering the complaint, deliver to all other parties an 
     offer to proceed pursuant to any voluntary, nonbinding 
     alternative dispute resolution procedure established or 
     recognized under the rules of the court in which the action 
     is maintained.
       ``(2) Plaintiff class actions.--In an implied private 
     action under this title which is brought as a plaintiff class 
     action, an offer under paragraph (1) shall be made not later 
     than 30 days after a guardian ad litem or plaintiff steering 
     committee is appointed by the court in accordance with 
     section 38.
       ``(3) Response.--The recipient of an offer under paragraph 
     (1) or (2) shall file a written notice of acceptance or 
     rejection of the offer with the court not later than 10 days 
     after receipt of the offer. The court may, upon motion by any 
     party made prior to the expiration of such period, extend the 
     period for not more than 90 additional days, during which 
     time discovery may be permitted by the court.
       ``(4) Selection of type of alternative dispute 
     resolution.--For purposes of paragraphs (1) and (2), if the 
     rules of the court establish or recognize more than 1 type of 
     alternative dispute resolution, the parties may stipulate as 
     to the type of alternative dispute resolution to be applied. 
     If the parties are unable to so stipulate, the court shall 
     issue an order not later than 20 days after the date on which 
     the parties agree to the use of alternative dispute 
     resolution, specifying the type of alternative dispute 
     resolution to be applied.
       ``(5) Sanctions for dilatory or obstructive conduct.--If 
     the court finds that a party has engaged in dilatory or 
     obstructive conduct in taking or opposing any discovery 
     allowed during the response period described in paragraph 
     (3), the court may--
       ``(A) extend the period to permit further discovery from 
     that party for a suitable period; and
       ``(B) deny that party the opportunity to conduct further 
     discovery prior to the expiration of the period.
       ``(b) Penalty for Unreasonable Litigation Position.--
       ``(1) Award of costs.--In an implied private action arising 
     under this title, upon motion of the prevailing party made 
     prior to final judgment, the court shall award costs, 
     including reasonable attorneys' fees, against a party or 
     parties or their attorneys, if--
       ``(A) the party unreasonably refuses to proceed pursuant to 
     an alternative dispute resolution procedure, or refuses to 
     accept the result of an alternative dispute resolution 
     procedure;
       ``(B) final judgment is entered against the party; and
       ``(C) the party asserted a claim or defense in the action 
     which was not substantially justified.
       ``(2) Determination of justification.--For purposes of 
     paragraph (1)(C), whether a position is `substantially 
     justified' shall be determined in the same manner as under 
     section 2412(d)(1)(B) of title 28, United States Code.
       ``(3) Limited use.--Fees and costs awarded under this 
     paragraph shall not be applied to any named plaintiff in any 
     action certified as a class action under the Federal Rules of 
     Civil Procedure if such plaintiff has never owned more than 
     $1,000,000 of the securities which are the subject of the 
     litigation.''.
       (b) Limitations Period for Implied Private Rights of 
     Action.--The Securities Exchange Act of 1934 (15 U.S.C. 78a 
     et seq.) is amended by adding at the end the following new 
     section:

     ``SEC. 37. LIMITATIONS PERIOD FOR IMPLIED PRIVATE RIGHTS OF 
                   ACTION.

       ``(a) In General.--Except as otherwise provided in this 
     title, an implied private right of action arising under this 
     title shall be brought not later than the earlier of--
       ``(1) 5 years after the date on which the alleged violation 
     occurred; or
       ``(2) 2 years after the date on which the alleged violation 
     was discovered or should have been discovered through the 
     exercise of reasonable diligence.
       ``(b) Effective Date.--The limitations period provided by 
     this section shall apply to all proceedings pending on or 
     commenced after the date of enactment of this section.''.

     SEC. 103. PLAINTIFF STEERING COMMITTEES.

       The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
     is amended by adding at the end the following new section:

     ``SEC. 38. GUARDIAN AD LITEM AND CLASS ACTION STEERING 
                   COMMITTEES.

       ``(a) Guardian Ad Litem.--Except as provided in subsection 
     (b), not later than 10 days after certifying a plaintiff 
     class in an implied private action brought under this title, 
     the court shall appoint a guardian ad litem for the plaintiff 
     class from a list or lists provided by the parties or their 
     counsel. The guardian ad litem shall direct counsel for the 
     class and perform such other functions as the court may 
     specify. The court shall apportion the reasonable fees and 
     expenses of the guardian ad litem among the parties. Court 
     appointment of a guardian ad litem shall not be subject to 
     interlocutory review.
       ``(b) Class Action Steering Committee.--Subsection (a) 
     shall not apply if, not later than 10 days after certifying a 
     plaintiff class, on its own motion or on motion of a member 
     of the class, the court appoints a committee of class members 
     to direct counsel for the class (hereafter in this section 
     referred to as the `plaintiff steering committee') and to 
     perform such other functions as the court may specify. Court 
     appointment of a plaintiff steering committee shall not be 
     subject to interlocutory review.
       ``(c) Membership of Plaintiff Steering Committee.--
       ``(1) Qualifications.--
       ``(A) Number.--A plaintiff steering committee shall consist 
     of not less than 5 class members, willing to serve, who the 
     court believes will fairly represent the class.
       ``(B) Ownership interests.--Members of the plaintiff 
     steering committee shall have cumulatively held during the 
     class period not less than--
       ``(i) the lesser of 5 percent of the securities which are 
     the subject matter of the litigation or securities which are 
     the subject matter of the litigation with a market value of 
     $10,000,000; or
       ``(ii) such smaller percentage or dollar amount as the 
     court finds appropriate under the circumstances.
       ``(2) Named plaintiffs.--Class members who are named 
     plaintiffs in the litigation may serve on the plaintiff 
     steering committee, but shall not comprise a majority of the 
     committee.
       ``(3) Noncompensation of members.--Members of the plaintiff 
     steering committee shall serve without compensation, except 
     that any member may apply to the court for reimbursement of 
     reasonable out-of-pocket expenses from any common fund 
     established for the class.
       ``(4) Meetings.--The plaintiff steering committee shall 
     conduct its business at one or more previously scheduled 
     meetings of the committee at which a majority of its members 
     are present in person or by electronic communication. The 
     plaintiff steering committee shall decide all matters within 
     its authority by a majority vote of all members, except that 
     the committee may determine that decisions other than to 
     accept or reject a settlement offer or to employ or dismiss 
     counsel for the class may be delegated to one or more members 
     of the committee, or may be voted upon by committee members 
     seriatim, without a meeting.
       ``(5) Right of nonmembers to be heard.--A class member who 
     is not a member of the plaintiff steering committee may 
     appear and be heard by the court on any issue in the action, 
     to the same extent as any other party.
       ``(d) Functions of Guardian Ad Litem and Plaintiff Steering 
     Committee.--
       ``(1) Direct counsel.--The authority of the guardian ad 
     litem or the plaintiff steering committee to direct counsel 
     for the class shall include all powers normally permitted to 
     an attorney's client in litigation, including the authority 
     to retain or dismiss counsel and to reject offers of 
     settlement, and the preliminary authority to accept an offer 
     of settlement, subject to the restrictions specified in 
     paragraph (2). Dismissal of counsel other than for cause 
     shall not limit the ability of counsel to enforce any 
     contractual fee agreement or to apply to the court for a fee 
     award from any common fund established for the class.
       ``(2) Settlement offers.--If a guardian ad litem or a 
     plaintiff steering committee gives preliminary approval to an 
     offer of settlement, the guardian ad litem or the plaintiff 
     steering committee may seek approval of the offer by a 
     majority of class members if the committee determines that 
     the benefit of seeking such approval outweighs the cost of 
     soliciting the approval of class members.
       ``(e) Immunity From Liability; Removal.--Any person serving 
     as a guardian ad litem or as a member of a plaintiff steering 
     committee shall be immune from any liability arising from 
     such service. The court may remove a guardian ad litem or a 
     member of a plaintiff steering committee for good cause 
     shown.
       ``(f) Effect on Other Law.--This section does not affect 
     any other provision of law concerning class actions or the 
     authority of the court to give final approval to any offer of 
     settlement.''.

     SEC. 104. REQUIREMENTS FOR SECURITIES FRAUD ACTIONS.

       The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
     is amended by adding at the end the following new section:

     ``SEC. 39. REQUIREMENTS FOR SECURITIES FRAUD ACTIONS.

       ``(a) Intent.--In an implied private action arising under 
     this title in which the plaintiff may recover money damages 
     from a defendant only on proof that the defendant acted with 
     some level of intent, the plaintiff's complaint shall allege 
     specific facts demonstrating the state of mind of each 
     defendant at the time the alleged violation occurred.
       ``(b) Misleading Statements and Omissions.--In an implied 
     action arising under this title in which the plaintiff 
     alleges that the defendant--
       ``(1) made an untrue statement of a material fact; or
       ``(2) omitted to state a material fact necessary in order 
     to make the statements made, in the light of the 
     circumstances in which they were made, not misleading;

     the plaintiff shall specify each statement alleged to have 
     been misleading, the reason or reasons why the statement is 
     misleading, and, if an allegation regarding the statement or 
     omission is made on information and belief, the plaintiff 
     shall set forth all information on which that belief is 
     formed.
       ``(c) Burden of Proof.--In an implied private action 
     arising under this title based on a material misstatement or 
     omission concerning a security, and in which the plaintiff 
     claims to have bought or sold the security based on a 
     reasonable belief that the market value of the security 
     reflected all publicly available information, the plaintiff 
     shall have the burden of proving that the misstatement or 
     omission caused any loss incurred by the plaintiff.
       ``(d) Damages.--In an implied private action arising under 
     this title based on a material misstatement or omission 
     concerning a security, and in which the plaintiff claims to 
     have bought or sold the security based on a reasonable belief 
     that the market value of the security reflected all publicly 
     available information, the plaintiff's damages shall not 
     exceed the lesser of--
       ``(1) the difference between the price paid by the 
     plaintiff for the security and the market value of the 
     security immediately after dissemination to the market of 
     information which corrects the misstatement or omission; and
       ``(2) the difference between the price paid by the 
     plaintiff for the security and the price at which the 
     plaintiff sold the security after dissemination of 
     information correcting the misstatement or omission.''.

     SEC. 105. AMENDMENT TO RACKETEER INFLUENCED AND CORRUPT 
                   ORGANIZATIONS ACT.

       Section 1964(c) of title 18, United States Code, is amended 
     by inserting ``, except that no person may bring an action 
     under this provision if the racketeering activity, as defined 
     in section 1961(1)(D), involves fraud in the sale of 
     securities'' before the period.
                     TITLE II--FINANCIAL DISCLOSURE

     SEC. 201. SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS.

       (a) Consideration of Regulatory or Legislative Changes.--In 
     consultation with investors and issuers of securities, the 
     Securities and Exchange Commission shall consider adopting or 
     amending its rules and regulations, or making legislative 
     recommendations, concerning--
       (1) criteria that the Commission finds appropriate for the 
     protection of investors by which forward-looking statements 
     concerning the future economic performance of an issuer of 
     securities registered under section 12 of the Securities 
     Exchange Act of 1934 will be deemed not to be in violation of 
     section 10(b) of that Act; and
       (2) procedures by which courts shall timely dismiss claims 
     against such issuers of securities based on such forward-
     looking statements if such statements are in accordance with 
     any criteria under paragraph (1).
       (b) Commission Considerations.--In developing rules or 
     legislative recommendations in accordance with subsection 
     (a), the Commission shall consider--
       (1) appropriate limits to liability for forward-looking 
     statements;
       (2) procedures for making a summary determination of the 
     applicability of any Commission rule for forward-looking 
     statements early in a judicial proceeding to limit protracted 
     litigation and expansive discovery;
       (3) incorporating and reflecting the scienter requirements 
     applicable to implied private actions under section 10(b); 
     and
       (4) providing clear guidance to issuers of securities and 
     the judiciary.
       (c) Securities Act Amendment.--The Securities and Exchange 
     Act of 1934 (15 U.S.C. 78a et seq.), is amended by adding at 
     the end the following new section:

     ``SEC. 40. APPLICATION OF SAFE HARBOR FOR FORWARD-LOOKING 
                   STATEMENTS.

       ``(a) In General.--In any implied private action arising 
     under this title that alleges that a forward-looking 
     statement concerning the future economic performance of an 
     issuer registered under section 12 was materially false or 
     misleading, if a party making a motion in accordance with 
     subsection (b) requests a stay of discovery concerning the 
     claims or defenses of that party, the court shall grant such 
     a stay until it has ruled on any such motion.
       ``(b) Summary Judgment Motions.--Subsection (a) shall apply 
     to any motion for summary judgment made by a defendant 
     asserting that the forward-looking statement was within the 
     coverage of any rule which the Commission may have adopted 
     concerning such predictive statements, if such motion is made 
     not less than 60 days after the plaintiff commences discovery 
     in the action.
       ``(c) Dilatory Conduct; Duplicative Discovery.--
     Notwithstanding subsection (a) or (b), the time permitted for 
     a plaintiff to conduct discovery under subsection (b) may be 
     extended, or a stay of the proceedings may be denied, if the 
     court finds that--
       ``(1) the defendant making a motion described in subsection 
     (b) engaged in dilatory or obstructive conduct in taking or 
     opposing any discovery; or
       ``(2) a stay of discovery pending a ruling on a motion 
     under subsection (b) would be substantially unfair to the 
     plaintiff or other parties to the action.''.

     SEC. 202. FRAUD DETECTION AND DISCLOSURE.

       (a) In General.--The Securities Exchange Act of 1934 (15 
     U.S.C. 78a et seq.) is amended by inserting immediately after 
     section 10 the following new section:

     ``SEC. 10A. AUDIT REQUIREMENTS.

       ``(a) In General.--Each audit required pursuant to this 
     title of an issuer's financial statements by an independent 
     public accountant shall include, in accordance with generally 
     accepted auditing standards, as may be modified or 
     supplemented from time to time by the Commission--
       ``(1) procedures designed to provide reasonable assurance 
     of detecting illegal acts that would have a direct and 
     material effect on the determination of financial statement 
     amounts;
       ``(2) procedures designed to identify related party 
     transactions which are material to the financial statements 
     or otherwise require disclosure therein; and
       ``(3) an evaluation of whether there is substantial doubt 
     about the issuer's ability to continue as a going concern 
     during the ensuing fiscal year.
       ``(b) Required Response to Audit Discoveries.--
       ``(1) Investigation and report to management.--If, in the 
     course of conducting an audit pursuant to this title to which 
     subsection (a) applies, the independent public accountant 
     detects or otherwise becomes aware of information indicating 
     that an illegal act (whether or not perceived to have a 
     material effect on the issuer's financial statements) has or 
     may have occurred, the accountant shall, in accordance with 
     generally accepted auditing standards, as may be modified or 
     supplemented from time to time by the Commission--
       ``(A)(i) determine whether it is likely that an illegal act 
     has occurred; and
       ``(ii) if so, determine and consider the possible effect of 
     the illegal act on the financial statements of the issuer, 
     including any contingent monetary effects, such as fines, 
     penalties, and damages; and
       ``(B) as soon as practicable, inform the appropriate level 
     of the issuer's management and assure that the issuer's audit 
     committee, or the issuer's board of directors in the absence 
     of such a committee, is adequately informed with respect to 
     illegal acts that have been detected or have otherwise come 
     to the attention of such accountant in the course of the 
     audit, unless the illegal act is clearly inconsequential.
       ``(2) Response to failure to take remedial action.--If, 
     having first assured itself that the audit committee of the 
     board of directors of the issuer or the board (in the absence 
     of an audit committee) is adequately informed with respect to 
     illegal acts that have been detected or have otherwise come 
     to the accountant's attention in the course of such 
     accountant's audit, the independent public accountant 
     concludes that--
       ``(A) the illegal act has a material effect on the 
     financial statements of the issuer;
       ``(B) the senior management has not taken, and the board of 
     directors has not caused senior management to take, timely 
     and appropriate remedial actions with respect to the illegal 
     act; and
       ``(C) the failure to take remedial action is reasonably 
     expected to warrant departure from a standard auditor's 
     report, when made, or warrant resignation from the audit 
     engagement;

     the independent public accountant shall, as soon as 
     practicable, directly report its conclusions to the board of 
     directors.
       ``(3) Notice to commission; response to failure to 
     notify.--An issuer whose board of directors receives a report 
     under paragraph (2) shall inform the Commission by notice not 
     later than 1 business day after the receipt of such report 
     and shall furnish the independent public accountant making 
     such report with a copy of the notice furnished to the 
     Commission. If the independent public accountant fails to 
     receive a copy of the notice before the expiration of the 
     required 1-business-day period, the independent public 
     accountant shall--
       ``(A) resign from the engagement; or
       ``(B) furnish to the Commission a copy of its report (or 
     the documentation of any oral report given) not later than 1 
     business day following such failure to receive notice.
       ``(4) Report after resignation.--If an independent public 
     accountant resigns from an engagement under paragraph (3)(A), 
     the accountant shall, not later than 1 business day following 
     the failure by the issuer to notify the Commission under 
     paragraph (3), furnish to the Commission a copy of the 
     accountant's report (or the documentation of any oral report 
     given).
       ``(c) Auditor Liability Limitation.--No independent public 
     accountant shall be liable in a private action for any 
     finding, conclusion, or statement expressed in a report made 
     pursuant to paragraph (3) or (4) of subsection (b), including 
     any rules promulgated pursuant thereto.
       ``(d) Civil Penalties in Cease-and-Desist Proceedings.--If 
     the Commission finds, after notice and opportunity for 
     hearing in a proceeding instituted pursuant to section 21C, 
     that an independent public accountant has willfully violated 
     paragraph (3) or (4) of subsection (b), the Commission may, 
     in addition to entering an order under section 21C, impose a 
     civil penalty against the independent public accountant and 
     any other person that the Commission finds was a cause of 
     such violation. The determination to impose a civil penalty 
     and the amount of the penalty shall be governed by the 
     standards set forth in section 21B.
       ``(e) Preservation of Existing Authority.--Except as 
     provided in subsection (d), nothing in this section shall be 
     held to limit or otherwise affect the authority of the 
     Commission under this title.
       ``(f) Definition.--As used in this section, the term 
     `illegal act' means an act or omission that violates any law, 
     or any rule or regulation having the force of law.''.
       (b) Effective Dates.--With respect to any registrant that 
     is required to file selected quarterly financial data 
     pursuant to item 302(a) of Regulation S-K of the Securities 
     and Exchange Commission (17 CFR 229.302(a)), the amendments 
     made by subsection (a) shall apply to any annual report for 
     any period beginning on or after January 1, 1994. With 
     respect to any other registrant, the amendment shall apply 
     for any period beginning on or after January 1, 1995.

     SEC. 203. PROPORTIONATE LIABILITY AND JOINT AND SEVERAL 
                   LIABILITY.

       (a) Securities Act Amendment.--The Securities and Exchange 
     Act of 1934 (15 U.S.C. 78a et seq.) is amended by adding at 
     the end the following new section:

     ``SEC. 41. PROPORTIONATE LIABILITY AND JOINT AND SEVERAL 
                   LIABILITY IN IMPLIED ACTIONS.

       ``(a) Applicability.--This section shall apply only to the 
     allocation of damages among persons who are, or who may 
     become, liable for damages in an implied private action 
     arising under this title. Nothing in this section shall 
     affect the standards for liability associated with an implied 
     private action arising under this title.
       ``(b) Application of Joint and Several Liability.--
       ``(1) In general.--A person against whom a judgment is 
     entered in an implied private action arising under this title 
     shall be liable jointly and severally for any recoverable 
     damages on such judgment if the person is found to have--
       ``(A) been a primary wrongdoer;
       ``(B) committed knowing securities fraud; or
       ``(C) controlled any primary wrongdoer or person who 
     committed knowing securities fraud.
       ``(2) Primary wrongdoer.--As used in this subsection--
       ``(A) the term `primary wrongdoer' means--
       ``(i) any--

       ``(I) issuer, registrant, purchaser, seller, or underwriter 
     of securities;
       ``(II) marketmaker or specialist in securities; or
       ``(III) clearing agency, securities information processor, 
     or government securities dealer;

     if such person breached a direct statutory or regulatory 
     obligation or if such person otherwise had a principal role 
     in the conduct that is the basis for the implied right of 
     action; or
       ``(ii) any person who intentionally rendered substantial 
     assistance to the fraudulent conduct of any person described 
     in clause (i), with actual knowledge of such person's 
     fraudulent conduct or fraudulent purpose, and with knowledge 
     that such conduct was wrongful; and
       ``(B) a defendant engages in `knowing securities fraud' if 
     such defendant--
       ``(i) makes a material representation with actual knowledge 
     that the representation is false, or omits to make a 
     statement with actual knowledge that, as a result of the 
     omission, one of the defendant's material representations is 
     false and knows that other persons are likely to rely on that 
     misrepresentation or omission, except that reckless conduct 
     by the defendant shall not be construed to constitute 
     `knowing securities fraud'; or
       ``(ii) intentionally rendered substantial assistance to the 
     fraudulent conduct of any person described in clause (i), 
     with actual knowledge of such person's fraudulent conduct or 
     fraudulent purpose, and with knowledge that such conduct was 
     wrongful.
       ``(c) Determination of Responsibility.--In an implied 
     private action in which more than 1 person contributed to a 
     violation of this title, the court shall instruct the jury to 
     answer special interrogatories, or if there is no jury, shall 
     make findings, concerning the degree of responsibility of 
     each person alleged to have caused or contributed to the 
     violation of this title, including persons who have entered 
     into settlements with the plaintiff. The interrogatories or 
     findings shall specify the amount of damages the plaintiff is 
     entitled to recover and the degree of responsibility, 
     measured as a percentage of the total fault of all persons 
     involved in the violation, of each person found to have 
     caused or contributed to the damages incurred by the 
     plaintiff or plaintiffs. In determining the degree of 
     responsibility, the trier of fact shall consider--
       ``(1) the nature of the conduct of each person; and
       ``(2) the nature and extent of the causal relationship 
     between that conduct and the damage claimed by the plaintiff.
       ``(d) Application of Proportionate Liability.--Except as 
     provided in subsection (b), the amount of liability of a 
     person who is, or may through right of contribution become, 
     liable for damages based on an implied private action arising 
     under this title shall be determined as follows:
       ``(1) Degree of responsibility.--Except as provided in 
     paragraph (2), each liable party shall only be liable for the 
     portion of the judgment that corresponds to that party's 
     degree of responsibility, as determined under subsection (c).
       ``(2) Uncollectible shares.--If, upon motion made not later 
     than 6 months after a final judgment is entered, the court 
     determines that all or part of a defendant's share of the 
     obligation is uncollectible--
       ``(A) the remaining defendants shall be jointly and 
     severally liable for the uncollectible share if the plaintiff 
     establishes that--
       ``(i) the plaintiff is an individual whose recoverable 
     damages under a final judgment are equal to more than 10 
     percent of the plaintiff's net financial worth; and
       ``(ii) the plaintiff's net financial worth is less than 
     $200,000; and
       ``(B) the amount paid by each of the remaining defendants 
     to all other plaintiffs shall be, in total, not more than the 
     greater of--
       ``(i) that remaining defendant's percentage of fault for 
     the uncollectible share; or
       ``(ii) 5 times--

       ``(I) the amount which the defendant gained from the 
     conduct that gave rise to its liability; or
       ``(II) if a defendant did not obtain a direct financial 
     gain from the conduct that gave rise to the liability and the 
     conduct consisted of the provision of deficient services to 
     an entity involved in the violation, the defendant's gross 
     revenues received for the provision of all services to the 
     other entity involved in the violation during the calendar 
     years in which deficient services were provided.

       ``(3) Overall limit.--In no event shall the total payments 
     required pursuant to paragraph (2) exceed the amount of the 
     uncollectible share.
       ``(4) Defendants subject to contribution.--A defendant 
     whose liability is reallocated pursuant to paragraph (2) 
     shall be subject to contribution and to any continuing 
     liability to the plaintiff on the judgment.
       ``(5) Right of contribution.--To the extent that a 
     defendant is required to make an additional payment pursuant 
     to paragraph (2), that defendant may recover contribution--
       ``(A) from the defendant originally liable to make the 
     payment;
       ``(B) from any defendant liable jointly and severally 
     pursuant to subsection (b)(1);
       ``(C) from any defendant held proportionately liable 
     pursuant to this subsection who is liable to make the same 
     payment and has paid less than his or her proportionate share 
     of that payment; or
       ``(D) from any other person responsible for the conduct 
     giving rise to the payment who would have been liable to make 
     the same payment.
       ``(e) Nondisclosure to Jury.--The standard for allocation 
     of damages under subsections (b)(1) and (c) and the procedure 
     for reallocation of uncollectible shares under subsection 
     (d)(2) shall not be disclosed to members of the jury.
       ``(f) Settlement Discharge.--
       ``(1) In general.--A defendant who settles an implied 
     private action brought under this title at any time before 
     verdict or judgment shall be discharged from all claims for 
     contribution brought by other persons. Upon entry of the 
     settlement by the court, the court shall enter a bar order 
     constituting the final discharge of all obligations to the 
     plaintiff of the settling defendant arising out of the 
     action. The order shall bar all future claims for 
     contribution or indemnity arising out of the action--
       ``(A) by nonsettling persons against the settling 
     defendant; and
       ``(B) by the settling defendant against any nonsettling 
     defendants.
       ``(2) Reduction.--If a person enters into a settlement with 
     the plaintiff prior to verdict or judgment, the verdict or 
     judgment shall be reduced by the greater of--
       ``(A) an amount that corresponds to the degree of 
     responsibility of that person; or
       ``(B) the amount paid to the plaintiff by that person.
       ``(g) Contribution.--A person who becomes liable for 
     damages in an implied private action arising under this title 
     may recover contribution from any other person who, if joined 
     in the original suit, would have been liable for the same 
     damages. A claim for contribution shall be determined based 
     on the degree of responsibility of the claimant and of each 
     person against whom a claim for contribution is made.
       ``(h) Statute of Limitations for Contribution.--Once 
     judgment has been entered in an implied private action 
     arising under this title determining liability, an action for 
     contribution must be brought not later than 6 months after 
     the entry of a final, nonappealable judgment in the action, 
     except that an action for contribution brought by a defendant 
     who was required to make an additional payment pursuant to 
     subsection (d)(2) may be brought not later than 6 months 
     after the date on which such payment was made.''.
       (b) Effective Date.--Section 41 of the Securities Exchange 
     Act of 1934, as added by subsection (a), shall only apply to 
     implied private actions commenced after the date of enactment 
     of this Act.

     SEC. 204. PUBLIC AUDITING SELF-DISCIPLINARY BOARD.

       The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
     is amended by inserting immediately after section 13 the 
     following new section:

     ``SEC. 13A. PUBLIC AUDITING SELF-DISCIPLINARY BOARD.

       ``(a) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Public accounting firm.--The term `public accounting 
     firm' means a sole proprietorship, unincorporated 
     association, partnership, corporation, or other legal entity 
     that is engaged in the practice of public accounting.
       ``(2) Board.--The term `Board' means the Public Auditing 
     Self-Disciplinary Board designated by the Commission pursuant 
     to subsection (b).
       ``(3) Accountant's report.--The term `accountant's report' 
     means a document in which a public accounting firm identifies 
     a financial statement, report, or other document and sets 
     forth the firm's opinion regarding such financial statement, 
     report, or other document, or an assertion that an opinion 
     cannot be expressed.
       ``(4) Person associated with a public accounting firm.--The 
     term `person associated with a public accounting firm' means 
     a natural person who--
       ``(A) is a partner, shareholder, employee, or individual 
     proprietor of a public accounting firm, or who shares in the 
     profits of a public accounting firm; and
       ``(B) engages in any conduct or practice in connection with 
     the preparation of an accountant's report on any financial 
     statement, report, or other document required to be filed 
     with the Commission under any securities law.
       ``(5) Professional standards.--The term `professional 
     standards' means generally accepted auditing standards, 
     generally accepted accounting principles, generally accepted 
     standards for attestation engagements, and any other 
     standards related to the preparation of financial statements 
     or accountant's reports promulgated by the Commission or a 
     standard-setting body recognized by the Board.
       ``(b) Establishment of Board.--
       ``(1) In general.--Not later than 90 days after the date of 
     enactment of this section, the Commission shall establish a 
     Public Auditing Self-Disciplinary Board to perform the duties 
     set forth in this section. The Commission shall designate an 
     entity to serve as the Board if the Commission finds that--
       ``(A) such entity is sponsored by an existing national 
     organization of certified public accountants that--
       ``(i) is most representative of certified public 
     accountants covered by this title; and
       ``(ii) has demonstrated its commitment to improving the 
     quality of practice before the Commission; and
       ``(B) control over such entity is vested in the members of 
     the Board selected pursuant to subsection (c).
       ``(2) Alternative election of members.--If the Commission 
     designates an entity to serve as the Board pursuant to 
     paragraph (1), the entity shall conduct the election of 
     initial Board members in accordance with subsection 
     (c)(1)(B)(i).
       ``(c) Membership of Board.--
       ``(1) In general.--The Board shall be composed of 3 
     appointed members and 4 elected members, as follows:
       ``(A) Appointed members.--Three members of the Board shall 
     be appointed in accordance with the following:
       ``(i) Initial appointments.--The Chairman of the Commission 
     shall make the initial appointments, in consultation with the 
     other members of the Commission, not later than 90 days after 
     the date of enactment of this section.
       ``(ii) Subsequent appointments.--After the initial 
     appointments under clause (i), members of the Board appointed 
     to fill vacancies of appointed members of the Board shall be 
     appointed in accordance with the rules adopted pursuant to 
     paragraph (5). Such rules shall provide that such members 
     shall be appointed by the Board, subject to the approval of 
     the Commission.
       ``(B) Elected members.--Four members, including the member 
     who shall serve as the chairperson of the Board, shall be 
     elected in accordance with the following:
       ``(i) Initial election.--Not later than 120 days after the 
     date on which the Chairman of the Commission makes 
     appointments under subparagraph (A)(i), an entity designated 
     by the Commission pursuant to subsection (b) shall conduct an 
     election of 4 initial elected members pursuant to interim 
     election rules proposed by the entity and approved by the 3 
     interim members of the Board and the Commission. If the 
     Commission is unable to designate an entity meeting the 
     criteria set forth in subsection (b)(1), the members of the 
     Board appointed under subparagraph (A)(i) shall adopt interim 
     rules, subject to approval by the Commission, providing for 
     the election of the 4 initial elected members. Such rules 
     shall provide that such members of the Board shall be 
     elected--

       ``(I) not later than 120 days after the date on which 
     members are initially appointed under subparagraph (A)(i);
       ``(II) by persons who are associated with public accounting 
     firms and who are certified public accountants under the laws 
     of any State; and
       ``(III) subject to the approval of the Commission.

       ``(ii) Subsequent elections.--After the initial elections 
     under clause (i), members of the Board elected to fill 
     vacancies of elected members of the Board shall be elected in 
     accordance with the rules adopted pursuant to paragraph (5). 
     Such rules shall provide that such members of the Board shall 
     be elected--

       ``(I) by persons who are associated with public accounting 
     firms and who are certified public accountants under the laws 
     of any State; and
       ``(II) subject to the approval of the Commission.

       ``(2) Qualification.--Four members of the Board, including 
     the chairperson of the Board, shall be persons who have not 
     been associated with a public accounting firm during the 10-
     year period preceding appointment or election to the Board 
     under paragraph (1). Three members of the Board who are 
     elected shall be persons associated with a public accounting 
     firm registered with the Board.
       ``(3) Full-time basis.--The chairperson of the Board shall 
     serve on a full-time basis, severing all business ties with 
     his or her former firms or employers prior to beginning 
     service on the Board.
       ``(4) Terms.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     each member of the Board shall hold office for a term of 4 
     years or until a successor is appointed, whichever is later, 
     except that any member appointed to fill a vacancy occurring 
     prior to the expiration of the term for which such member's 
     predecessor was appointed shall be appointed for the 
     remainder of such term.
       ``(B) Initial board members.--Beginning on the date on 
     which all members of the Board have been selected in 
     accordance with this subsection, the terms of office of the 
     initial Board members shall expire, as determined by the 
     Board, by lottery--
       ``(i) for 1 member, 1 year after such date;
       ``(ii) for 2 members, 2 years after such date;
       ``(iii) for 2 members, 3 years after such date; and
       ``(iv) for 2 members, 4 years after such date.
       ``(5) Rules.--Following selection of the 7 initial members 
     of the Board in accordance with subparagraphs (A)(i) and 
     (B)(i) of paragraph (1), the Board shall propose and adopt 
     rules, which shall provide for--
       ``(A) the operation and administration of the Board, 
     including--
       ``(i) the appointment of members in accordance with 
     paragraph (1)(A)(ii);
       ``(ii) the election of members in accordance with paragraph 
     (1)(B)(ii); and
       ``(iii) the compensation of the members of the Board;
       ``(B) the appointment and compensation of such employees, 
     attorneys, and consultants as may be necessary or appropriate 
     to carry out the Board's functions under this title;
       ``(C) the registration of public accounting firms with the 
     Board pursuant to subsections (d) and (e); and
       ``(D) the matters described in subsections (f) and (g).
       ``(d) Registration and Annual Fees.--After the date on 
     which all initial members of the Board have been selected in 
     accordance with subsection (c), the Board shall assess and 
     collect a registration fee and annual dues from each public 
     accounting firm registered with the Board. Such fees and dues 
     shall be assessed at a level sufficient to recover the costs 
     and expenses of the Board and to permit the Board to operate 
     on a self-financing basis. The amount of fees and dues for 
     each public accounting firm shall be based upon--
       ``(1) the annual revenues of such firm from accounting and 
     auditing services;
       ``(2) the number of persons associated with the public 
     accounting firm;
       ``(3) the number of clients for which such firm furnishes 
     accountant's reports on financial statements, reports, or 
     other documents filed with the Commission; and
       ``(4) such other criteria as the Board may establish.
       ``(e) Registration With Board.--
       ``(1) Registration required.--Beginning 1 year after the 
     date on which all initial members of the Board have been 
     selected in accordance with subsection (c), it shall be 
     unlawful for a public accounting firm to furnish an 
     accountant's report on any financial statement, report, or 
     other document required to be filed with the Commission under 
     any Federal securities law, unless such firm is registered 
     with the Board.
       ``(2) Application for registration.--A public accounting 
     firm may be registered under this subsection by filing with 
     the Board an application for registration in such form and 
     containing such information as the Board, by rule, may 
     prescribe. Each application shall include--
       ``(A) the names of all clients of the public accounting 
     firm for which the firm furnishes accountant's reports on 
     financial statements, reports, or other documents filed with 
     the Commission;
       ``(B) financial information of the public accounting firm 
     for its most recent fiscal year, including its annual 
     revenues from accounting and auditing services, its assets 
     and its liabilities;
       ``(C) a statement of the public accounting firm's policies 
     and procedures with respect to quality control of its 
     accounting and auditing practice;
       ``(D) information relating to criminal, civil, or 
     administrative actions or formal disciplinary proceedings 
     pending against such firm, or any person associated with such 
     firm, in connection with an accountant's report furnished by 
     such firm;
       ``(E) a list of persons associated with the public 
     accounting firm who are certified public accountants, 
     including any State professional license or certification 
     number for each such person; and
       ``(F) such other information that is reasonably related to 
     the Board's responsibilities as the Board considers necessary 
     or appropriate.
       ``(3) Periodic reports.--Once in each year, or more 
     frequently as the Board, by rule, may prescribe, each public 
     accounting firm registered with the Board shall submit 
     reports to the Board updating the information contained in 
     its application for registration and containing such 
     additional information that is reasonably related to the 
     Board's responsibilities as the Board, by rule, may 
     prescribe.
       ``(4) Exemptions.--The Commission, by rule or order, upon 
     its own motion or upon application, may conditionally or 
     unconditionally exempt any public accounting firm or any 
     accountant's report, or any class of public accounting firms 
     or any class of accountant's reports, from any provisions of 
     this section or the rules or regulations issued hereunder, if 
     the Commission finds that such exemption is consistent with 
     the public interest, the protection of investors, and the 
     purposes of this section.
       ``(5) Confidentiality.--The Board may, by rule, designate 
     portions of the filings required pursuant to paragraphs (2) 
     and (3) as privileged and confidential.
       ``(f) Duties of Board.--After the date on which all initial 
     members of the Board have been selected in accordance with 
     subsection (c), the Board shall have the following duties and 
     powers:
       ``(1) Investigations and disciplinary proceedings.--The 
     Board shall establish fair procedures for investigating and 
     disciplining public accounting firms registered with the 
     Board, and persons associated with such firms, for violations 
     of the Federal securities laws, the rules or regulations 
     issued thereunder, the rules adopted by the Board, or 
     professional standards in connection with the preparation of 
     an accountant's report on a financial statement, report, or 
     other document filed with the Commission.
       ``(2) Investigation procedures.--
       ``(A) In general.--The Board may conduct an investigation 
     of any act, practice, or omission by a public accounting firm 
     registered with the Board, or by any person associated with 
     such firm, in connection with the preparation of an 
     accountant's report on a financial statement, report, or 
     other document filed with the Commission that may violate any 
     applicable provision of the Federal securities laws, the 
     rules and regulations issued thereunder, the rules adopted by 
     the Board, or professional standards, whether such act, 
     practice, or omission is the subject of a criminal, civil, or 
     administrative action, or a disciplinary proceeding, or 
     otherwise is brought to the attention of the Board.
       ``(B) Powers of board.--For purposes of an investigation 
     under this paragraph, the Board may, in addition to such 
     other actions as the Board determines to be necessary or 
     appropriate--
       ``(i) require the testimony of any person associated with a 
     public accounting firm registered with the Board, with 
     respect to any matter which the Board considers relevant or 
     material to the investigation;
       ``(ii) require the production of audit workpapers and any 
     other document or information in the possession of a public 
     accounting firm registered with the Board, or any person 
     associated with such firm, wherever domiciled, that the Board 
     considers relevant or material to the investigation, and may 
     examine the books and records of such firm to verify the 
     accuracy of any documents or information so supplied; and
       ``(iii) request the testimony of any person and the 
     production of any document in the possession of any person, 
     including a client of a public accounting firm registered 
     with the Board, that the Board considers relevant or material 
     to the investigation.
       ``(C) Suspension or revocation of registration for 
     noncompliance.--The refusal of any person associated with a 
     public accounting firm registered with the Board to testify, 
     or the refusal of any such person to produce documents or 
     otherwise cooperate with the Board, in connection with an 
     investigation under this section, shall be cause for 
     suspending or barring such person from associating with a 
     public accounting firm registered with the Board, or such 
     other appropriate sanction as the Board shall determine. The 
     refusal of any public accounting firm registered with the 
     Board to produce documents or otherwise cooperate with the 
     Board, in connection with an investigation under this 
     section, shall be cause for the suspension or revocation of 
     the registration of such firm, or such other appropriate 
     sanction as the Board shall determine.
       ``(D) Referral to commission.--
       ``(i) In general.--If the Board is unable to conduct or 
     complete an investigation under this section because of the 
     refusal of any client of a public accounting firm registered 
     with the Board, or any other person, to testify, produce 
     documents, or otherwise cooperate with the Board in 
     connection with such investigation, the Board shall report 
     such refusal to the Commission.
       ``(ii) Investigation.--The Commission may designate the 
     Board or one or more officers of the Board who shall be 
     empowered, in accordance with such procedures as the 
     Commission may adopt, to subpoena witnesses, compel their 
     attendance, and require the production of any books, papers, 
     correspondence, memoranda, or other records relevant to any 
     investigation by the Board. Attendance of witnesses and the 
     production of any records may be required from any place in 
     the United States or any State at any designated place of 
     hearing. Enforcement of a subpoena issued by the Board, or an 
     officer of the Board, pursuant to this subparagraph shall 
     occur in the manner provided for in section 21(c). 
     Examination of witnesses subpoenaed pursuant to this 
     subparagraph shall be conducted before an officer authorized 
     to administer oaths by the laws of the United States or of 
     the place where the examination is held.
       ``(iii) Referrals to commission.--The Board may refer any 
     investigation to the Commission, as the Board deems 
     appropriate.
       ``(E) Immunity from civil liability.--An employee of the 
     Board engaged in carrying out an investigation or 
     disciplinary proceeding under this section shall be immune 
     from any civil liability arising out of such investigation or 
     disciplinary proceeding in the same manner and to the same 
     extent as an employee of the Federal Government in similar 
     circumstances.
       ``(3) Disciplinary procedures.--
       ``(A) Decision to discipline.--In a proceeding by the Board 
     to determine whether a public accounting firm, or a person 
     associated with such firm, should be disciplined, the Board 
     shall bring specific charges, notify such firm or person of 
     the charges, give such firm or person an opportunity to 
     defend against such charges, and keep a record of such 
     actions.
       ``(B) Sanctions.--If the Board finds that a public 
     accounting firm, or a person associated with such firm, has 
     engaged in any act, practice, or omission in violation of the 
     Federal securities laws, the rules or regulations issued 
     thereunder, the rules adopted by the Board, or professional 
     standards, the Board may impose such disciplinary sanctions 
     as it deems appropriate, including--
       ``(i) revocation or suspension of registration under this 
     section;
       ``(ii) limitation of activities, functions, and operations;
       ``(iii) fine;
       ``(iv) censure;
       ``(v) in the case of a person associated with a public 
     accounting firm, suspension or bar from being associated with 
     a public accounting firm registered with the Board; and
       ``(vi) any other disciplinary sanction that the Board 
     determines to be appropriate.
       ``(C) Statement required.--A determination by the Board to 
     impose a disciplinary sanction shall be supported by a 
     written statement by the Board setting forth--
       ``(i) any act or practice in which the public accounting 
     firm or person associated with such firm has been found to 
     have engaged, or which such firm or person has been found to 
     have omitted;
       ``(ii) the specific provision of the Federal securities 
     laws, the rules or regulations issued thereunder, the rules 
     adopted by the Board, or professional standards which any 
     such act, practice, or omission is deemed to violate; and
       ``(iii) the sanction imposed and the reasons therefor.
       ``(D) Prohibition on association.--It shall be unlawful--
       ``(i) for any person as to whom a suspension or bar is in 
     effect willfully to be or to become associated with a public 
     accounting firm registered with the Board, in connection with 
     the preparation of an accountant's report on any financial 
     statement, report, or other document filed with the 
     Commission, without the consent of the Board or the 
     Commission; and
       ``(ii) for any public accounting firm registered with the 
     Board to permit such a person to become, or remain, 
     associated with such firm without the consent of the Board or 
     the Commission, if such firm knew or, in the exercise of 
     reasonable care should have known, of such suspension or bar.
       ``(4) Reporting of sanctions.--If the Board imposes a 
     disciplinary sanction against a public accounting firm, or a 
     person associated with such firm, the Board shall report such 
     sanction to the Commission, to the appropriate State or 
     foreign licensing board or boards with which such firm or 
     such person is licensed or certified to practice public 
     accounting, and to the public. The information reported shall 
     include--
       ``(A) the name of the public accounting firm, or person 
     associated with such firm, against whom the sanction is 
     imposed;
       ``(B) a description of the acts, practices, or omissions 
     upon which the sanction is based;
       ``(C) the nature of the sanction; and
       ``(D) such other information respecting the circumstances 
     of the disciplinary action (including the name of any client 
     of such firm affected by such acts, practices, or omissions) 
     as the Board deems appropriate.
       ``(5) Discovery and admissibility of board material.--
       ``(A) Discoverability.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     all reports, memoranda, and other information prepared, 
     collected, or received by the Board, and the deliberations 
     and other proceedings of the Board and its employees and 
     agents in connection with an investigation or disciplinary 
     proceeding under this section shall not be subject to any 
     form of civil discovery, including demands for production of 
     documents and for testimony of individuals, in connection 
     with any proceeding in any State or Federal court, or before 
     any State or Federal administrative agency. This subparagraph 
     shall not apply to any information provided to the Board that 
     would have been subject to discovery from the person or 
     entity that provided it to the Board, but is no longer 
     available from that person or entity.
       ``(ii) Exemption.--Submissions to the Board by or on behalf 
     of a public accounting firm or person associated with such a 
     firm or on behalf of any other participant in a Board 
     proceeding, including documents generated by the Board 
     itself, shall be exempt from discovery to the same extent as 
     the material described in clause (i), whether in the 
     possession of the Board or any other person, if such 
     submission--

       ``(I) is prepared specifically for the purpose of the Board 
     proceeding; and
       ``(II) addresses the merits of the issues under 
     investigation by the Board.

       ``(iii) Construction.--Nothing in this subparagraph shall 
     limit the authority of the Board to provide appropriate 
     public access to disciplinary hearings of the Board, or to 
     reports or memoranda received by the Board in connection with 
     such proceedings.
       ``(B) Admissibility.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     all reports, memoranda, and other information prepared, 
     collected, or received by the Board, the deliberations and 
     other proceedings of the Board and its employees and agents 
     in connection with an investigation or disciplinary 
     proceeding under this section, the fact that an investigation 
     or disciplinary proceeding has been commenced, and the 
     Board's determination with respect to any investigation or 
     disciplinary proceeding shall be inadmissible in any 
     proceeding in any State or Federal court or before any State 
     or Federal administrative agency.
       ``(ii) Treatment of certain documents.--Submissions to the 
     Board by or on behalf of a public accounting firm or person 
     associated with such a firm or on behalf of any other 
     participant in a Board proceeding, including documents 
     generated by the Board itself, shall be inadmissible to the 
     same extent as the material described in clause (i), if such 
     submission--

       ``(I) is prepared specifically for the purpose of the Board 
     proceedings; and
       ``(II) addresses the merits of the issues under 
     investigation by the Board.

       ``(C) Availability and admissibility of information.--
       ``(i) In general.--All information referred to in 
     subparagraphs (A) and (B) shall be--

       ``(I) available to the Commission and to any other Federal 
     department or agency in connection with the exercise of its 
     regulatory authority to the extent that such information 
     would be available to such agency from the Commission as a 
     result of a Commission enforcement investigation;
       ``(II) available to Federal and State authorities in 
     connection with any criminal investigation or proceeding;
       ``(III) admissible in any action brought by the Commission 
     or any other Federal department or agency pursuant to its 
     regulatory authority, to the extent that such information 
     would be available to such agency from the Commission as a 
     result of a Commission enforcement investigation and in any 
     criminal action; and
       ``(IV) available to State licensing boards to the extent 
     authorized in paragraph (6).

       ``(ii) Other limitations.--Any documents or other 
     information provided to the Commission or other authorities 
     pursuant to clause (i) shall be subject to the limitations on 
     discovery and admissibility set forth in subparagraphs (A) 
     and (B).
       ``(D) Title 5 treatment.--This subsection shall be 
     considered to be a statute described in section 552(b)(3)(B) 
     of title 5, United States Code, for purposes of that section 
     552.
       ``(6) Participation by state licensing boards.--
       ``(A) Notice.--When the Board institutes an investigation 
     pursuant to paragraph (2)(A), it shall notify the State 
     licensing boards in the States in which the public accounting 
     firm or person associated with such firm engaged in the act 
     or failure to act alleged to have violated professional 
     standards, of the pendancy of the investigation, and shall 
     invite the State licensing boards to participate in the 
     investigation.
       ``(B) Acceptance by state board.--
       ``(i) Participation.--If a State licensing board elects to 
     join in the investigation, its representatives shall 
     participate, pursuant to rules established by the Board, in 
     investigating the matter and in presenting the evidence 
     justifying the charges in any hearing pursuant to paragraph 
     (3)(A).
       ``(ii) Review.--In the event that the State licensing board 
     disagrees with the Board's determination with respect to the 
     matter under investigation, it may seek review of that 
     determination by the Commission pursuant to procedures that 
     the Commission shall specify by regulation.
       ``(C) Prohibition on concurrent investigations.--A State 
     licensing board shall not institute its own proceeding with 
     respect to a matter referred to in subparagraph (A) until 
     after the Board's determination has become final, including 
     completion of all review by the Commission and the courts.
       ``(D) State sanctions permitted.--If the Board or the 
     Commission imposes a sanction upon a public accounting firm 
     or person associated with such a firm, and that determination 
     either is not subjected to judicial review or is upheld on 
     judicial review, a State licensing board may impose a 
     sanction on the basis of the Board's report pursuant to 
     paragraph (4). Any sanction imposed by the State licensing 
     board under this clause shall be inadmissible in any 
     proceeding in any State or Federal court or before any State 
     or Federal administrative agency, except to the extent 
     provided in paragraph (5)(D).
       ``(E) Sanctions not permitted.--If a sanction is not 
     imposed on a public accounting firm or person associated with 
     such a firm, and--
       ``(i) a State licensing board elected to participate in an 
     investigation referred to in subparagraph (A), the State 
     licensing board may not impose a sanction with respect to the 
     matter; and
       ``(ii) a State licensing board elected not to participate 
     in an investigation referred to in subparagraph (A), 
     subparagraphs (A) and (B) of paragraph (5) shall apply with 
     respect to any investigation or proceeding subsequently 
     instituted by the State licensing board and, in particular, 
     the State licensing board shall not have access to the record 
     of the proceeding before the Board and that record shall be 
     inadmissible in any proceeding before the State licensing 
     board.
       ``(g) Additional Duties Regarding Quality Control.--After 
     the date on which all initial members of the Board have been 
     selected in accordance with subsection (c), the Board shall 
     have the following duties and powers in addition to those set 
     forth in subsection (f):
       ``(1) In general.--The Board shall seek to promote a high 
     level of professional conduct among public accounting firms 
     registered with the Board, to improve the quality of audit 
     services provided by such firms, and, in general, to protect 
     investors and promote the public interest.
       ``(2) Professional peer review organizations.--
       ``(A) Membership requirement.--The Board shall require each 
     public accounting firm subject to the disciplinary authority 
     of the Board to be a member of a professional peer review 
     organization certified by the Board pursuant to subparagraph 
     (B).
       ``(B) Criteria for certification.--The Board shall, by 
     rule, establish general criteria for the certification of 
     peer review organizations and shall certify organizations 
     that satisfy those criteria, or such amended criteria as the 
     Board may adopt. To be certified, a peer review organization 
     shall, at a minimum--
       ``(i) require a member public accounting firm to undergo 
     peer review not less than once every 3 years and publish the 
     results of the peer review; and
       ``(ii) adopt standards that are acceptable to the Board 
     relating to audit service quality control.
       ``(C) Penalties.--Violation by a public accounting firm or 
     a person associated with such a firm of a rule of the peer 
     review organization to which the firm belongs shall 
     constitute grounds for--
       ``(i) the imposition of disciplinary sanctions by the Board 
     pursuant to subsection (f); and
       ``(ii) denial to the public accounting firm or person 
     associated with such firm of the privilege of appearing or 
     practicing before the Commission.
       ``(3) Confidentiality.--Except as otherwise provided by 
     this section, all reports, memoranda, and other information 
     provided to the Board solely for purposes of paragraph (2), 
     or to a peer review organization certified by the Board, 
     shall be confidential and privileged, unless such 
     confidentiality and privilege are expressly waived by the 
     person or entity that created or provided the information.
       ``(h) Commission Oversight of the Board.--
       ``(1) Proposed rule changes.--
       ``(A) In general.--The Board shall file with the 
     Commission, in accordance with such rules as the Commission 
     may prescribe, copies of any proposed rule or any proposed 
     change in, addition to, or deletion from the rules of the 
     Board (hereafter in this subsection collectively referred to 
     as a `proposed rule change') accompanied by a concise general 
     statement of the basis and purpose of such proposed rule 
     change. The Commission shall, upon the filing of any proposed 
     rule change, publish notice thereof together with the terms 
     of substance of the proposed rule change or a description of 
     the subjects and issues involved. The Commission shall give 
     interested persons an opportunity to submit written data, 
     views, and arguments concerning the proposed rule change. No 
     proposed rule change shall take effect unless approved by the 
     Commission or otherwise permitted in accordance with this 
     subsection.
       ``(B) Approval or disapproval.--
       ``(i) In general.--Not later than 35 days after the date on 
     which notice of the filing of a proposed rule change is 
     published in accordance with subparagraph (A), or such longer 
     period as the Commission may designate (not to exceed 90 days 
     after such date, if it finds such longer period to be 
     appropriate and publishes its reasons for such finding or as 
     to which the Board consents) the Commission shall--

       ``(I) by order approve such proposed rule change; or
       ``(II) institute proceedings to determine whether the 
     proposed rule change should be disapproved.

       ``(ii) Disapproval proceedings.--Proceedings for 
     disapproval shall include notice of the grounds for 
     disapproval under consideration and opportunity for hearing 
     and shall be concluded not later than 180 days after the date 
     of publication of notice of the filing of the proposed rule 
     change. At the conclusion of the proceedings for disapproval, 
     the Commission, by order, shall approve or disapprove such 
     proposed rule change. The Commission may extend the time for 
     conclusion of such proceedings for--

       ``(I) not more than 60 days, if the Commission finds good 
     cause for such extension and publishes its reasons for such 
     finding; or
       ``(II) such longer period to which the Board consents.

       ``(iii) Approval.--The Commission shall approve a proposed 
     rule change if it finds that such proposed rule change is 
     consistent with the requirements of the Federal securities 
     laws, and the rules and regulations issued thereunder, 
     applicable to the Board. The Commission shall disapprove a 
     proposed rule change if it does not make such finding. The 
     Commission shall not approve any proposed rule change prior 
     to the expiration of the 30-day period beginning on the date 
     on which notice of the filing of a proposed rule change is 
     published in accordance with this subparagraph, unless the 
     Commission finds good cause to do so and publishes its 
     reasons for such finding.
       ``(C) Effect of proposed rule change.--
       ``(i) Effective date.--Notwithstanding subparagraph (B), a 
     proposed rule change may take effect upon filing with the 
     Commission if designated by the Board as--

       ``(I) constituting a stated policy, practice, or 
     interpretation with respect to the meaning, administration, 
     or enforcement of an existing rule of the Board;
       ``(II) establishing or changing a due, fee, or other charge 
     imposed by the Board; or
       ``(III) concerned solely with the administration of the 
     Board or other matters which the Commission, by rule, 
     consistent with the public interest and the purposes of this 
     subsection, may specify.

       ``(ii) Summary effect.--Notwithstanding any other provision 
     of this subsection, a proposed rule change may be put into 
     effect summarily if it appears to the Commission that such 
     action is necessary for the protection of investors. Any 
     proposed rule change put into effect summarily shall be filed 
     promptly thereafter in accordance with this paragraph.
       ``(iii) Enforcement.--Any proposed rule change which has 
     taken effect pursuant to clause (i) or (ii) may be enforced 
     by the Board to the extent that it is not inconsistent with 
     the Federal securities laws, the rules and regulations issued 
     thereunder, and applicable Federal and State law. During the 
     60-day period beginning on the date on which notice of the 
     filing of a proposed rule change if filed in accordance with 
     this paragraph, the Commission may summarily abrogate the 
     change in the rules of the Board made thereby and require 
     that the proposed rule change be refiled in accordance with 
     subparagraph (A) and reviewed in accordance with subparagraph 
     (B), if it appears to the Commission that such action is 
     necessary or appropriate in the public interest, for the 
     protection of investors, or otherwise in furtherance of the 
     purposes of the Federal securities laws. Commission action 
     pursuant to the preceding sentence shall not affect the 
     validity or force of the rule change during the period it was 
     in effect and shall not be reviewable under section 25 of 
     this Act nor deemed to be `final agency action' for purposes 
     of section 704 of title 5, United States Code.
       ``(2) Amendment by commission of rules of the board.--The 
     Commission, by rule, may abrogate, add to, and delete from 
     (hereafter in this subsection collectively referred to as 
     `amend') the rules of the Board as the Commission deems 
     necessary or appropriate to ensure the fair administration of 
     the Board, to conform its rules to requirements of the 
     Federal securities laws, and the rules and regulations issued 
     thereunder applicable to the Board, or otherwise in 
     furtherance of the purposes of the Federal securities laws, 
     in the following manner:
       ``(A) Publication of notice.--The Commission shall notify 
     the Board and publish notice of the proposed rulemaking in 
     the Federal Register. The notice shall include the text of 
     the proposed amendment to the rules of the Board and a 
     statement of the Commission's reasons, including any 
     pertinent facts, for commencing such proposed rulemaking.
       ``(B) Comments.--The Commission shall give interested 
     persons an opportunity for the oral presentation of data, 
     views, and arguments, in addition to an opportunity to make 
     written submissions. A transcript shall be kept of any oral 
     presentation.
       ``(C) Incorporation.--A rule adopted pursuant to this 
     subsection shall incorporate the text of the amendment to the 
     rules of the Board and a statement of the Commission's basis 
     for and purpose in so amending such rules. Such statement 
     shall include an identification of any facts on which the 
     Commission considers its determination to so amend the rules 
     of the Board to be based, including the reasons for the 
     Commission's conclusions as to any of the facts that were 
     disputed in the rulemaking.
       ``(D) Regulations.--
       ``(i) Title 5 applicability.--Except as otherwise provided 
     in this paragraph, rulemaking under this paragraph shall be 
     in accordance with the procedures specified in section 553 of 
     title 5, United States Code, for rulemaking not on the 
     record.
       ``(ii) Construction.--Nothing in this subsection shall be 
     construed to impair or limit the Commission's power to make, 
     modify, or alter the procedures the Commission may follow in 
     making rules and regulations pursuant to any other authority 
     under the Federal securities laws.
       ``(iii) Incorporation of amendments.--Any amendment to the 
     rules of the Board made by the Commission pursuant to this 
     subsection shall be considered for purposes of the Federal 
     securities laws to be part of the rules of the Board and 
     shall not be considered to be a rule of the Commission.
       ``(3) Notice of disciplinary action taken by the board; 
     review of action by the commission.--
       ``(A) Notice required.--If the Board imposes a final 
     disciplinary sanction on a public accounting firm registered 
     with the Board or on any person associated with such a firm, 
     the Board shall promptly file notice thereof with the 
     Commission. The notice shall be in such form and contain such 
     information as the Commission, by rule, may prescribe as 
     necessary or appropriate in furtherance of the purposes of 
     the Federal securities laws.
       ``(B) Review.--An action with respect to which the Board is 
     required by subparagraph (A) to file notice shall be subject 
     to review by the Commission, on its own motion, or upon 
     application by any person aggrieved thereby, filed not later 
     than 30 days after the date on which such notice is filed 
     with the Commission and received by such aggrieved person, or 
     within such longer period as the Commission may determine. 
     Application to the Commission for review, or the institution 
     of review by the Commission on its own motion, shall not 
     operate as a stay of such action unless the Commission 
     otherwise orders, summarily or after notice and opportunity 
     for hearing on the question of a stay (which hearing may 
     consist solely of the submission of affidavits or 
     presentation of oral arguments). The Commission shall 
     establish for appropriate cases an expedited procedure for 
     consideration and determination of the question of a stay.
       ``(4) Disposition of review; cancellation, reduction, or 
     remission of sanction.--
       ``(A) In general.--In any proceeding to review a final 
     disciplinary sanction imposed by the Board on a public 
     accounting firm registered with the Board or a person 
     associated with such a firm, after notice and opportunity for 
     hearing (which hearing may consist solely of consideration of 
     the record before the Board and opportunity for the 
     presentation of supporting reasons to affirm, modify, or set 
     aside the sanction)--
       ``(i) if the Commission finds that--

       ``(I) such firm or person associated with such a firm has 
     engaged in such acts or practices, or has omitted such acts, 
     as the Board has found them to have engaged in or omitted;
       ``(II) such acts, practices, or omissions, are in violation 
     of such provisions of the Federal securities laws, the rules 
     or regulations issued thereunder, the rules adopted by the 
     Board, or professional standards as have been specified in 
     the determination of the Board; and
       ``(III) such provisions were applied in a manner consistent 
     with the purposes of the Federal securities laws;

     the Commission, by order, shall so declare and, as 
     appropriate, affirm the sanction imposed by the Board, modify 
     the sanction in accordance with paragraph (2), or remand to 
     the Board for further proceedings; or
       ``(ii) if the Commission does not make the findings under 
     clause (i), it shall, by order, set aside the sanction 
     imposed by the Board and, if appropriate, remand to the Board 
     for further proceedings.
       ``(B) Cancellation, reduction, or remission of sanction.--
     If the Commission, having due regard for the public interest 
     and the protection of investors, finds after a proceeding in 
     accordance with subparagraph (A) that a sanction imposed by 
     the Board upon a firm or person associated with a firm 
     imposes any burden on competition not necessary or 
     appropriate in furtherance of the purposes of the Federal 
     securities laws or is excessive or oppressive, the Commission 
     may cancel, reduce, or require the remission of such 
     sanction.
       ``(5) Compliance with rules and regulations.--
       ``(A) Duties of board.--The Board shall--
       ``(i) comply with the Federal securities laws, the rules 
     and regulations issued thereunder, and its own rules; and
       ``(ii) subject to subparagraph (B) and the rules 
     thereunder, absent reasonable justification or excuse, 
     enforce compliance with such provisions and with professional 
     standards by public accounting firms registered with the 
     Board and persons associated with such firms.
       ``(B) Relief by commission.--The Commission, by rule, 
     consistent with the public interest, the protection of 
     investors, and the other purposes of the Federal securities 
     laws, may relieve the Board of any responsibility under this 
     section to enforce compliance with any specified provision of 
     the Federal securities laws, the rules or regulations issued 
     thereunder, or professional standards by any public 
     accounting firm registered with the Board or person 
     associated with such a firm, or any class of such firms or 
     persons associated with such a firm.
       ``(6) Censure; other sanctions.--
       ``(A) In general.--The Commission is authorized, by order, 
     if in its opinion such action is necessary or appropriate in 
     the public interest, for the protection of investors, or 
     otherwise in furtherance of the purposes of the Federal 
     securities laws, to censure or impose limitations upon the 
     activities, functions, and operations of the Board, if the 
     Commission finds, on the record after notice and opportunity 
     for hearing, that the Board has--
       ``(i) violated or is unable to comply with any provision of 
     the Federal securities laws, the rules or regulations issued 
     thereunder, or its own rules; or
       ``(ii) without reasonable justification or excuse, has 
     failed to enforce compliance with any such provision or any 
     professional standard by a public accounting firm registered 
     with the Board or a person associated with such a firm.
       ``(B) Removal from office.--The Commission is authorized, 
     by order, if in its opinion such action is necessary or 
     appropriate, in the public interest for the protection of 
     investors, or otherwise in furtherance of the purposes of the 
     Federal securities laws, to remove from office or censure any 
     member of the Board, if the Commission finds, on the record 
     after notice and opportunity for hearing, that such member 
     has--
       ``(i) willfully violated any provision of the Federal 
     securities laws, the rules or regulations issued thereunder, 
     or the rules of the Board;
       ``(ii) willfully abused such member's authority; or
       ``(iii) without reasonable justification or excuse, failed 
     to enforce compliance with any such provision or any 
     professional standard by any public accounting firm 
     registered with the Board or any person associated with such 
     a firm.
       ``(i) Foreign Accounting Firms.--A foreign public 
     accounting firm that furnishes accountant's reports on any 
     financial statement, report, or other document required to be 
     filed with the Commission under any Federal securities law 
     shall, with respect to those reports, be subject to the 
     provisions of this section in the same manner and to the same 
     extent as a domestic public accounting firm. The Commission 
     may, by rule, regulation, or order and as it deems consistent 
     with the public interest and the protection of investors, 
     either unconditionally or upon specified terms and 
     conditions, exempt from one or more provisions of this 
     section any foreign public accounting firm. Registration 
     pursuant to this subsection shall not, by itself, provide a 
     basis for subjecting foreign accounting firms to the 
     jurisdiction of the Federal or State courts.
       ``(j) Relationship With Antitrust Laws.--
       ``(1) Treatment under antitrust laws.--In no case shall the 
     Board, any member thereof, any public accounting firm 
     registered with the Board, or any person associated with such 
     a firm be subject to liability under any antitrust law for 
     any act of the Board or any failure to act by the Board.
       ``(2) Definition.--For purposes of this subsection, the 
     term `antitrust law' means the Federal Trade Commission Act 
     and each statute defined by section 4 thereof as `Antitrust 
     Acts' and all amendments to such Act and such statutes and 
     any other Federal Acts or State laws in pari materia.
       ``(k) Applicability of Auditing Principles.--Each audit 
     required pursuant to this title of an issuer's financial 
     statements by an independent public accountant shall be 
     conducted in accordance with generally accepted auditing 
     standards, as may be modified or supplemented from time-to-
     time by the Commission. The Commission may defer to 
     professional standards promulgated by private organizations 
     that are generally accepted by the accounting or auditing 
     profession.
       ``(l) Commission Authority Not Impaired.--Nothing in this 
     section shall be construed to impair or limit the 
     Commission's authority--
       ``(1) over the accounting profession, accounting firms, or 
     any persons associated with such firms;
       ``(2) to set standards for accounting practices, derived 
     from other provisions of the Federal securities laws or the 
     rules or regulations issued thereunder; or
       ``(3) to take, on its own initiative, legal, 
     administrative, or disciplinary action against any public 
     accounting firm registered with the Board or any person 
     associated with such a firm.''.
                                  ____


                        Selected Bill Provisions


                     plaintiff steering committees

       The objective: To provide a mechanism for ``plaintiff 
     empowerment.'' Allow plaintiffs to exercise their rightful 
     discretion in the litigation of their cases and to allow them 
     traditional control over their entrepreneurial counsel.
       Securities litigation is designed to protect the public and 
     compensate the injured. Increasingly, however, class action 
     securities litigation is dominated by the attorneys and the 
     plaintiffs are treated as merely a means to an end. This bill 
     reasserts plaintiffs' role by:
       Establishing a plaintiff steering committee, appointed by 
     the court, with all the powers traditionally held by clients 
     to retain or dismiss counsel, reject settlements, and to seek 
     approval of the class for settlement offers. At the court's 
     discretion, it can appoint a guardian ad litem in lieu of the 
     steering committee.


          providing alternative dispute resolution mechanisms

       The objective: To provide an efficient forum with a 
     specialized master to hear securities cases. To reduce time 
     and expense of resolving securities litigation cases. To 
     provide incentives for plaintiffs to use this effective 
     method of dispute resolution.
       The bill provides non-binding alternative dispute 
     resolution. Parties who refuse to cooperate with an ADR 
     process could be subject to fee-shifting if their position is 
     found not to have been substantially justified. In no case 
     would an investor who owned less than $1 million be subject 
     to fee shifting.


           requiring that scienter be pled with particularly

       The objective: To provide filter at the pleading stage to 
     screen out allegations that have no factual basis; To provide 
     clearer statement of plaintiffs' claims and scope of the 
     case; To encourage attorneys to use greater care in drafting 
     their complaints; Make it easier to win motion to dismiss 
     frivolous cases by requiring that scienter be pled with 
     particularity. Eliminate the split among Circuits dealing 
     with pleading requirements for scienter. To codify the 
     requirements in the 2nd and 7th Circuits.
       A complaint is supposed to outline the facts supporting the 
     law suit. Too often, the complaints are made up of boiler 
     plate legalese and conclusions. A 10b-5 allegation is a very 
     serious charge and the complaint should set forth the facts 
     supporting each of the elements, particularly scienter or 
     intent. ``The defendant acted with intent to defraud'' is a 
     conclusion that should be insufficient to start a 
     multimillion dollar lawsuit.
       Too often, securities class action suits are characterized 
     by the ``sue them all and let the judge sort it out'' 
     mentality. But before the judge can sort it out, uninvolved 
     defendants are required to spend great deals of time and 
     money to defend against specious claims. This bill corrects 
     that problem by requiring plaintiffs to specify the 
     statements alleged to have been misleading. Again, this is 
     not a novel idea; it is merely bringing securities actions 
     in line with Rule 9(b) of the Federal Rules of Civil 
     Procedure and codifying the requirements enunciated in the 
     2nd and 7th Circuits.


ATTORNEY FEE REFORM: BAN THE LODESTAR METHOD OF CALCULATING ATTORNEY'S 
FEES REPLACE WITH A MORE EASILY UNDERSTOOD DISCLOSURE OF ATTORNEYS FEES

       The objective: Closer align the interests of the plaintiffs 
     with their entrepreneurial lawyers. Make it easier for the 
     class to understand how the lawyers are being compensated and 
     to challenge attorneys fees. To make ensure that attorney 
     fees do not unnecessarily conflict with the interests of the 
     plaintiffs.
       Plaintiff's attorneys fees are often calculated by the 
     ``lodestar method.'' Under this calculation a lodestar amount 
     is determined by multiplying the attorney's hours worked by 
     reasonable hourly fee adjusted by a multiplier to reflect the 
     risk of litigation and other factors. It encourages abuses 
     such as unjustified work and protracted the litigation. From 
     the judicial point of view lodestar adds inefficiency to the 
     process. From the investors' point of view it is difficult to 
     figure out what the lawyers did and how much they are getting 
     paid for doing it.
       The lodestar method of calculating an appropriate 
     attorneys' fee in class actions totally eclipses the facts 
     surrounding the legal work done. This bill brings 
     transparency to the topic of legal fees. The bill eliminates 
     the very complicated method of determining attorney's fees. 
     This bill limits attorney's fees in a class action to an easy 
     to understand percentage of the amount actually recovered as 
     a result of the attorney's efforts, rather than allowing them 
     to recover their fees without regard to how well the class 
     does. This is extremely important in ensuring that the 
     attorneys' incentives coincide with those of the class. This 
     bill also provides the class members the information they 
     need to make an informed judgment on attorney fees and 
     settlement offers. This provides better disclosure to the 
     injured parties so they can determine whether they want to 
     challenge their attorneys' claim to their settlement fund.


                     DISCLOSURE OF SETTLEMENT TERMS

       The objective: Replace meaningless legalese and boiler 
     plate conclusions with meaningful information about the per 
     share amount a proposed settlement would provide. To provide 
     information about the fairness of the settlement and an 
     evaluation that more could be obtained if the case went to 
     trial.
       The bill would provide class members with information about 
     the potential damages and how they are calculated and a 
     comparison to the settlement.


                        proportionate liability

       The objective: To reduce the pressure to settle frivolous 
     claims. To provide a two-tier liability system which retains 
     joint and several liability for the primary participants in a 
     fraudulent scheme and proportionate liability for those 
     participants who are only incidentally involved.
       The Securities Private Enforcement and Integrity in 
     Financial Disclosure Act of 1994 ensures that those primarily 
     responsible for the plaintiff's loss bear the primary burden 
     in making the plaintiff whole. Specifically, this bill:
       Requires the courts to determine who is primarily at fault, 
     and holds that person jointly and severally liable for the 
     plaintiff's damages.
       Provides a special provision in those situations where 
     there is an insolvent defendant. The bill provides that the 
     co-defendants bear the risk of a co-defendant's insolvency as 
     between the plaintiff or a co-defendant.
       The NASCAT submission suggested that of the 66 cases they 
     provided us with information on, 25 percent had an insolvent 
     co-defendant.


                          contribution reform

       The objective: To provide uniformity among the Circuits and 
     to ensure that defendants are not unfairly required to pay 
     more than their fair share of damages.
       If a plaintiff is unable to recover damages from a 
     defendant, this bill requires the remaining defendants to 
     make up that difference by paying the greater of:
       A portion of the outstanding balance proportionate to their 
     fault; or
       Five times the defendant's financial gain from the 
     transaction which gave rise to their liability.
       Moreover, this bill provides an extra level of protection 
     for the most seriously injured; if a plaintiff has lost a 
     significant portion of his net worth, this bill provides that 
     he is entitled to a full recovery from the defendants, who 
     are in that case jointly and severally liable.
       Further, this bill encourages settlement by discharging 
     from liability any defendant who enters into a good faith 
     settlement with the plaintiff before a verdict or judgment.


                  safeharbor for predictive statements

       The Objective: Encourage disclosure of information by 
     companies, provide a procedural mechanism for companies who 
     make predictive statements in good faith to be protected if 
     their prediction does not materialize. Provide judges with 
     additional procedural tools to deal with frivolous 
     predictions cases.
       Forward looking information is of significant value to 
     investors in making informed investment decisions. It is this 
     forward looking information that allows efficient allocation 
     of resources, ensuring that the market prices of publicly 
     traded securities best reflect their intrinsic value. 
     Currently, the SEC's rules discourage issuers from 
     voluntarily disclosing this information. This bill makes it 
     clear that a reasonable basis for such information doesn't 
     have to be a unanimous basis. This bill directs the SEC to 
     consider establishing a system to:
       Provide a ``safe harbor'' so that statements regarding the 
     future economic performance of their companies will not be a 
     basis for a securities lawsuit against them. The SEC has a 
     safeharbor for predictive statements. It requires that there 
     be a ``reasonable basis'' for the statements.
       The Objective: Exposing Fraud before investors lose money.
       This bill establishes a clear and immediate duty on the 
     part of auditors to inform company management of any material 
     illegal acts they uncover in their audit. If the auditors 
     fail to take appropriate action promptly they are subject to 
     civil penalty.
       This is the Kerry-Wyden bill and we believe it belongs in 
     the package of reforms we are proposing. It is very important 
     for the accounting industry to be vigilant in their public 
     watch dog role.
       The Objective: To create an organization that will insure 
     financial statement quality control to provide greater 
     investor confidence. To create a self-disciplining 
     organization to insure that incompetent auditors are weeded 
     out of the profession.
       The Securities Private Enforcement and Integrity in 
     Financial Disclosure Act of 1994 institutes a system to 
     establish standards for the accounting profession and to 
     punish individuals and firms who violate those standards. 
     This board would be subject to the oversight of the S.E.C.
       The objective: To ensure that named plaintiffs have a bona 
     fide interest in the litigation.
       This bill requires that the named plaintiffs as a group own 
     at least 1% or $10,000 worth of the securities before they 
     can bring the lawsuit as a class action. This will help 
     eliminate the ``pet plaintiff'' problem where attorney's keep 
     lists of plaintiffs with minimal stock holdings, and bring 
     suit in their names in the ``race to the courthouse.''
       The objective: To extend the time available to victims of 
     fraud to bring suit.
       This bill extends the statute of limitations for 100b-5 
     suits to five years from the date of violation, two years 
     from the date of discovery.


         key provisions of dodd-domenici securities reform bill

                    Provisions that are pro-investor

       Steering Committees is a ``plaintiff empowerment'' 
     provision to put the investors in charge of the litigation. 
     Make sure the lawyers are acting in the best interest of the 
     investors. Small investors as well as larger investors can 
     participate as members.
       Better disclosure of settlement terms so that investors 
     understand what a settlement might mean to them. Disclosure 
     is required on a per share basis.
       Make sure all shareholders are treated equally by greatly 
     restricting lawyers' ability to negotiate bonus payments for 
     their ``pet plaintiffs'' who let the lawyers use their names 
     to file lawsuits.
       Reform legal fee computations to make it easier for 
     investors to understand how their lawyers are being 
     compensated out of their settlement fund. Tie plaintiffs' 
     lawyers' compensation directly to the recovery for their 
     clients, thereby, better aligning the lawyers' interests with 
     their clients'.
       Retains current law on joint and several liability to any 
     investor with a net worth of less than $200,000 who loses 
     more than 10 percent. Also retains joint and several 
     liability for the primary wrongdoer.
       Provide longer statute of limitations so that meritorious 
     cases can be thoroughly researched and filed in a timely 
     fashion.
       Provide Alternative Dispute Resolution mechanism to provide 
     an efficient forum to hear securities cases. To provide 
     incentives for plaintiffs' lawyers to use this method of 
     dispute resolution to get justice for their clients sooner 
     and cheaper.
       Extends the statute of limitations to five years from the 
     date of violation, two years from discovery.

        Provisions to slow down frivolous securities litigation

       Pleading reform to require that complaints spell out in 
     more detail other than legalese and conclusions why 
     plaintiffs' lawyers believe the class was defrauded.
       Provide a safeharbor for forward looking statements. 
     Predictions are predictions. Stock volatility isn't fraud. 
     Provide procedures so that innocent high tech companies can 
     get frivolous cases dismissed quickly thereby making more 
     time for judges to punish real perpetrators of fraud.
       Establish a plaintiff threshold to ensure that plaintiffs 
     instituting class actions have a bona fide interest in the 
     litigation. The named plaintiffs as a group must either own 
     1% of the securities or $10,000 of the securities before they 
     can bring the lawsuit as a class action.

 Provisions to provide better financial disclosure and higher quality 
                     auditor's financial statements

       Exposing Fraud before investors lose money. Establishes a 
     clear and immediate duty on the part of auditors to inform 
     management of any material illegal acts they uncover in 
     audits.
       Create a self-disciplining organization for auditors. To 
     insure financial statement quality control to provide greater 
     investor confidence.
  Mr. DOMENICI. Mr. President, every 4 working days a securities class 
action law suit is filed by one law firm. If you add the securities 
class action law suits filed by the other specialized law firms 
practicing in this field, a case is filed every day. Many times the 
real victim is a company whose only crime is stock volatility. Many 
times the losers are the investors because these law suits take money 
out of the companies' R&D budgets and give it to class action lawyers. 
A suspiciously high percentage of these cases settle. Often, the 
settlements are less than the companies' legal bills incurred to defend 
the law suit. This is a strong indication that the cases lack merit.
  The list of companies that have been sued reads like the who's who of 
high growth, high technology, and biotechnology companies. They are the 
backbone of our economy and the foundation of our ability to compete 
internationally in a changing world.
  It is a cookie cutter fact pattern in an environment of first-to-file 
races to the courthouse. It is a ``shoot, aim, ready'' approach to 
class action litigation where law suits are filed within hours of news 
that a company missed an earnings prediction.
  Information provided by the National Association of Securities and 
Commercial Law Attorneys [NASCAT] suggests that 56 percent of the cases 
that they handpicked to provide data on to the Securities Subcommittee 
were filed within 30 days of the triggering event. A triggering event 
is usually a missed earnings projection or so-called ``earnings 
surprise.'' Twenty-one percent of their sample cases were filed within 
48 hours of the triggering. The stock price drops and class action law 
suits are filed.
  I asked one of the plaintiffs' class action lawyers who appeared 
before the Senate Securities Subcommittee to provide some information 
on the class action securities suits his firm had filed during the last 
3 years. The data he provided showed that his firm never went to trial 
in 3 years. Thirty-eight percent of the cases were dismissed, 63 
percent were settled within the 3-year sample period, and out of the 
111 cases filed in 1990 and 1991, one of three ``pet plaintiffs'' were 
named plaintiffs in case after case 25 percent of the time.
  During the 2 days of hearings Chairman Dodd conducted on private 
litigation under the Federal securities laws, we heard from CEOs who 
had experienced the frivolous securities class action law suits first-
hand: Companies get sued when their stock drops. Another company was 
sued when it failed to read the mind of a judge who reversed an appeal 
on an unrelated matter.
  The general counsel for Intel testified that had Intel been sued when 
it was a startup, such a suit probably would have bankrupted the 
company long before it invented the microchip.
  These frivolous law suits are such a menace to publicly traded 
companies on the NASDAQ that the NASDAQ Self-Regulatory Organization 
decided to recommend reforms to Senator Dodd and me.
  Investors are recovering, on average, a few cents on the dollar. 
Attorneys are boasting that these securities class action cases are a 
perfect practice because according to quotes in Forbes magazine, 
``there are no clients.'' Yet clientless lawyers claim to be acting for 
the best interests of investors. Institutional investors believe these 
lawsuits are merely transferring money from one set of shareholders to 
another, with the plaintiffs' class action lawyers taking a lion's 
share that looks a lot like greenmail. Frivolous litigation is time 
consuming and distracts chief executives and other corporate officials 
from productive economic activity. It has been estimated that defending 
one of these lawsuits is as costly as starting up a totally new product 
line. Let me give you some examples. You can decide if this seems to be 
in the interest of investors.
  Pacific Enterprises--lawyers settle $1 billion case for $12 million 
and take $8 million of the settlement fund in legal fees.
  Prudential Bache Securities--investors represented by the firm who 
testified before the committee received four cents on the dollar under 
the class action lawsuit settlement. The firm took $6 million plus 
expenses. Other investors who hired their own lawyers went to 
arbitration and came away fully compensated.
  Apple Computer--case settled for $16 million. Attorneys received $8.9 
million, more than half of the settlement fund. Plaintiffs received 6 
cents on the dollar of the damages they sought.
  VMS Realty--another firm settled for $25 million and left investors 
with less than two cents on the dollar. But the firm walked away with 
$6 million. They did less work than lawyers who went to arbitration and 
fought for full compensation for their clients according to accounts in 
the New York Times.
  Once a settlement agreement is agreed to, the entrepreneurial lawyer 
with no clients becomes an adversary of the plaintiffs' class. Often 
the plaintiffs' attorneys and the defendants can settle on a basis that 
is adverse to the interests of the plaintiffs. The class action 
lawyers' interest shifts to protecting the settlement. ``At its worst, 
the settlement process may amount to a covert exchange of a cheap 
settlement for a high award of attorneys' fees,'' according to John 
Coffee of Columbia University. These cases do not help investors and 
they do not punish perpetrators of fraud because most settlement funds 
are paid by insurance companies.
  Individual investors get little monetary benefit from class action 
suits. But the system does not treat all investors the same. If you are 
lucky enough to be a class representative, sometimes call a pet 
plaintiff, or professional plaintiff, the plaintiffs' lawyers will 
negotiate a $1,000 to $15,000 bonus for letting them use your name. If 
you only purchased a couple of shares of stock, the return on the 
investment is much better than what the class receives as a whole. This 
practice undermines the fairness of the system. Hopefully our bill will 
put a stop to this practice.
  When I talk to some of the opponents to securities civil litigation 
reform, I feel like I am in the world of George Orwell's book, 
``1984,'' where the Ministry of Propaganda declared: War is peace; 
freedom is slavery; and ignorance is strength.
  In the 1994 securities litigation context the Orwellian plaintiffs' 
lawyers' arguments go like this: Stock volatility is fraud; justice is 
pennies for plaintiffs, equity is millions for lawyers; truth is too 
expensive; merits don't matter; settle don't litigate.
  Except in George Orwell's world, the conclusion of any one who has 
examined the issue carefully is: The current securities implied private 
litigation system is broken. The system is broken because too many 
cases are pursued for the purpose of extracting settlements from 
corporations and other parties, without regard to the merits of the 
case, and that the settlements yield large fees for plaintiffs' lawyers 
but compensate investors only for a fraction of their actual losses. 
Janet Cooper Alexander of Stanford University has proven that most 
securities class actions are settled by the parties without regard to 
whether the case has merit. SEC Chairman Arthur Levitt acknowledged 
recently that ``virtually all securities class actions are settled for 
some fraction of the claimed damages, and some alleged that settlements 
often fail to reflect the underlying merits of the cases. If true, this 
means that weak claims are overcompensated and strong claims are under-
compensated.'' Professor John Coffee has concluded the plaintiffs' 
attorneys in many securities class actions appear to ``sell out their 
clients in return for an overly generous fee award,'' and that the 
defendants may also join in this collusion by passing on the cost of 
the settlement to absent parties, such as insurers.''
  The plaintiffs lawyers like to sue the officers and directors, and 
the accountants, underwriters and issuers. These cases are brought 
under joint and several liability which means that any one defendant 
could be made to pay the entire judgment even if he or she were only 
marginally responsible.
  Our bill builds upon the State law trend of imposing proportionate 
liability. Our bill would retain joint and several liability for the 
really bad actors, but would provide proportionate liability for those 
parties only incidentally involved. In response to the Securities and 
Exchange Commission's staff concern we also included a special 
provision to address the problem of the insolvent defendant. We believe 
this provision strikes the correct balance. This liability reform is 
important to outside officers and directors, auditors, and others who 
often get named in the law suit but who have little if any true 
liability. It helps change the economies that drive these frivolous 
cases.

  The system seeks huge monetary recoveries from outside directors, 
outside lawyers, and independent accountants who may be only marginally 
involved in activities for which corporate officers should be primarily 
liable. Experienced people are declining to serve on boards because of 
the liability exposure. This denies growing companies the expertise 
they need to succeed. Private lawsuits for securities violations are 
having a chilling effect on corporate disclosure.
  Naming an accountant who, by State law usually must practice as a 
partnership, faces unlimited personal liability in these cases. Suing 
the accountant ensures that the settlement will be 50 percent larger 
because of their deep pocket.
  The current system also operates to discriminate against defendants. 
People who have deep pockets are often named in the law suits to coerce 
settlements. Accountants bear the brunt of our current system of joint 
and several liability.
  The fundamental purposes of the Federal securities laws are to 
promote investor confidence and deter fraud. Class action securities 
cases inhibit voluntary disclosure by corporations, discouraging them 
from making any public statements except when absolutely required, for 
fear that anything they say which might move the company's stock price 
might trigger a law suit.
  We want to get back to basics. The central principle underlying the 
securities laws is that investors should receive accurate and timely 
disclosure of the financial condition of publicly traded companies.
  The objective of this bill is to recognize that litigation isn't 
George Orwell's 1994 version of Big Brother looking out for investors' 
best interest. We reject ``stock volitility is fraud;'' We reject 
``justice is pennies for lawyers;'' We reject ``equity is millions for 
lawyers.''
  Our bill will encourage disclosure, strengthen confidence, realign 
the role of the entrepreneurial plaintiffs' lawyers with the best 
interests of their clients and change the risk/benefit equation of 
taking cases to the jury.
  The basis of our bill is to make the plaintiffs' bar, ``Stop, think, 
investigate, and research.''
  The spirit motivating this bill is the obligation that Chairman 
Levitt recently identified, ``to make sure the current system operates 
in the best interest of all investors. This means focusing not just on 
the interests of those who happen to be aggrieved in a particular case, 
but also on the interests of issuers and the markets as a whole.''
  I want to commend Chairman Dodd for taking on this issue. We 
developed a substantial hearing record and collected as many facts and 
opinions as we could. This bill is the product of a great deal of work 
and I want to express my admiration for the way he went about 
developing this legislation. It still needs refinement.
  Ms. MIKULSKI. Mr. President, I rise today to speak as an original 
cosponsor of the Private Securities Litigation Reform Act of 1994.
  I have been hearing about an increase in lawsuits being filed 
alleging securities fraud--and they are based on nothing more than a 
dramatic change in the price of a company's stock.
  I was shocked to hear that some attorneys are paying stock brokers 
and others a bounty in return for identifying who they should sue--
without a care about whether anything wrong has been done. These 
lawsuits are filed at the courthouse just hours after a change in stock 
price--suing everyone imaginable--this is the kitchen sink approach to 
the courthouse, rather than a system of justice that protects people.
  This bill seeks to make sure that the people who are injured--the 
investors--are calling the shots, not some attorneys or bounty hunter. 
This bill makes it easier for investors to recover damages in strong 
cases. It extends the statute of limitations for fraud from 3 years to 
5 years, so that people who are injured don't have to race to the 
courthouse. It also provides for alternative dispute resolution rather 
than requiring injured investors to go through a long, complicated, and 
expensive court proceeding. This puts the investor in the driver's 
seat, not some bounty hunter who is beholden only to attorneys.
  The bill also says that defendants who are hardly involved in a case 
are liable only up to their degree of fault. But when someone has 
caused serious injury, those defendants that are mainly at fault would 
be fully liable for all damages. This should bring to an end the 
kitchen sink approach to these lawsuits.
  I am absolutely opposed to the race to the courthouse mentality that 
ends up in needless suits that have huge litigation costs for society. 
I want to see the courthouse door kept open for the little guy, but 
let's get this bounty hunter law under control.
  I look forward to seeing this bill become law, because I was appalled 
to learn how the current bounty hunter law affects people in their day-
to-day lives.
  It hits accountants and other professionals through the high 
liability insurance premiums they have to pay.
  For those people, like accountants, pulled into the suits as part of 
the kitchen sink the disruption to their lives and their firm's work is 
huge.
  And it even affects the companies that accountants are willing to 
have as clients--like the new and expanding high-technology companies. 
These high-technology firms are the hope of jobs today and jobs 
tomorrow for the United States. These are the very companies who have 
big changes in their stock prices as they develop new technologies and 
bring them to market. And these new growing companies are the ones most 
in need of the breadth of services offered by many accounting firms.
  I am concerned about these costs, especially the costs to the high-
technology community. These high-technology companies are our biggest 
source of jobs today and jobs tomorrow. And I am hearing that the 
current bounty hunter law mentality is putting those jobs at risk.
  Rather than creating jobs, these high-technology companies are having 
to put their efforts and dollars into expensive litigation and 
insurance.
  I know how the system works with these lawsuits. It doesn't matter 
who's right or who's wrong. Both the guilty and the innocent end up 
settling at some big cost, even if just to avoid the risk and to get on 
with their lives.
  So the good guys cut their losses and the bad guys get off the hook.
  I am glad to cosponsor this bill that takes steps to take care of the 
good guys.
                                 ______

      By Mr. DODD (for himself, Mr. Kennedy, and Ms. Mikulski):
  S. 1977. A bill to amend title IV of the Social Security Act to 
reform child support enforcement procedures, and for other purposes; to 
the Committee on Finance.


                    Child Support Reform Act of 1994

 Mr. DODD. Mr. President, I rise today to introduce the Child 
Support Reform Act of 1994, which would get tough with parents who are 
cheating their own children out of their futures. It demands that 
noncustodial parents do the right thing by their children and taps the 
Internal Revenue Service to help make sure that happens. I am joined in 
this effort by Senator Kennedy and Senator Mikulski, both members of 
the Senate Democratic Task Force on Child Support I chaired in the last 
Congress.
  This legislation complements the Child Support Assurance Act of 1994, 
which Senator Rockefeller and I introduced Tuesday. That bill would 
test the proposition that we should guarantee a minimum level of child 
support for the children of America. The legislation I am introducing 
today addresses the other half of the equation by making sure that 
delinquent parents pay what they owe.


                             Welfare Reform

  We will soon embark on a major discussion of welfare reform, and 
there are many ideas out there about steps we can take to move people 
off welfare and into self-sufficiency. I would suggest that of all 
these proposals, none would do more to fight poverty than putting teeth 
into our child support enforcement system.
  The poverty rate for single-parent families headed by women is nearly 
33 percent. This compares to a poverty rate of under 8 percent for two-
parent families.
  The lack of child support is a major cause of poverty among single-
parent families in this country, and too often those families going 
without support end up on welfare. The link between lack of child 
support and poverty is clear, as the Census Bureau illustrated when it 
estimated that between 1984 and 1986 approximately half a million 
children fell into poverty after their fathers left home.
  In my view, the American people are willing to chip in to help 
struggling families get back on their feet after hard times. The people 
are much less willing to provide that kind of help if it is simply 
being used as a substitute for the support an absent parent should be 
providing.


                            lack of support

  Regrettably, that happens too often. today Forty-two percent of 
single mothers do not even have child support orders for their 
children, For poor women, this figure is 57 percent. And a child 
support order is no guarantee of support. In 1989, half of all mother-
led families with child support orders received no support at all or 
less than the amount due.
  Cases where the parents reside in different States have the worst 
collection rate. Although the same proportion of custodial parents have 
support orders in place, these families are twice as likely as families 
not separated by State lines to receive no support. Although interstate 
cases account for 3 of every 10 cases, they account for only $1 of 
every $10 in support collected.
  Enforcing these cases is a nightmare for the States. They must rely 
on other States to take action--States that are already burdened with 
their own cases. Too often, interstate cases seem to be slipped to the 
bottom of the enforcement pile.


                           effect on children

  What kind of difference would it make if child support were paid up? 
If every single-parent family had an award and the awards were paid in 
full, that would mean $30 billion a year for the children of America. 
It doesn't take a rocket scientist to figure out what that $30 billion 
would mean for their economic well-being.
  As a recent report titled ``Childhood's End'' by the National Child 
Support Assurance Consortium poignantly illustrated, the statistics are 
much more than simply numbers on a page for the children involved. For 
far too many young Americans, the lack of child support means poverty. 
It means not being able to go to the doctor when they're sick. It means 
going to bed hungry. It means teetering on the brink of homelessness.
  It is time for us to stop this slide toward public assistance by 
insisting that parents meet the responsibilities they have for the 
children they bring into the world. The children of America will be the 
true winners of such a policy, but the taxpayers would also come out 
ahead because of reduced welfare expenditures.


                        need for sweeping reform

  We have known for some time now that our child support system needs a 
major overhaul. And we have made a number of attempts to do something 
about it. A series of incremental reforms, including the child support 
amendments of 1984 and the Family Support Act of 1988, improved the 
situation somewhat, but we still have a long, long way to go, as a few 
telling statistics illustrate.
  For every 100 child support cases in 1983, there were 15 in which 
there was a collection. Eight years later, after a series of reforms, 
there were 18. Fifteen to 18 out of 100 is a step in the right 
direction, but it is a tiny step. The time for incremental reform has 
passed. It is now time for bold action.
  That's why I am today proposing the ``Child Support Reform Act of 
1994.'' This legislation would attack the cases states find most 
burdensome and challenging to enforce and the cases in which the 
children are least likely to see the money owed to them.
  The bill would federalize enforcement of interstate child support 
orders by placing responsibility for these awards in the Internal 
Revenue Service. Our State-by-State patchwork system of child support 
allows far too many irresponsible parents to skip out on their 
obligations simply because they have moved out of State. Interstate 
cases would be referred to the IRS if they are subject to wage 
withholding requirements or if they are at least 1 month delinquent in 
their payments.
  The bill would take other steps to create a more efficient, 
centralized system of enforcement. It would create State and national 
registries of support orders to centralize and speed up collection and 
enforcement of child support orders. It also would create a system of 
W-4 reporting for new hires to speed up the identification of parents 
with support obligations and get the payments flowing to children who 
depend on them faster.
  The bill also sets up a process for adopting national child support 
guidelines. The State-by-State guideline approach still leaves too many 
children behind, left with awards too low to meet their needs. Too 
often, children whose parents are in similar economic circumstances end 
up with vastly different awards--and therefore, vastly different living 
standards--simply because of what State they live in. National 
guidelines would create equity so that economic security does not 
depend on where a child lives.

  This legislation would pursue other avenues as well to force absent 
parents to live up to their responsibilities. It would report support 
arrearages to credit bureaus. It would also require the withholding of 
business and professional licenses, driver's licenses and vehicle 
registrations for nonpayment of support.
  Finally, the legislation would require States to use an 
administrative process to establish paternity, to secure child support 
orders and to enforce those orders. For a child waiting for the 
Government to establish a support order, every day counts. So, it is 
important to have a process for obtaining that order and getting the 
payments flowing that is as streamlined as possible. This approach 
allows States to expeditiously process the majority of cases that are 
very straightforward, getting support to kids and relieving court 
backlogs in the process.
  As this summary indicates, this is a tough bill. But it is intended 
to tackle a tough problem. I hope my colleagues will join me in 
supporting this approach to strike a blow against child poverty and a 
blow for the taxpayers of America.
  I ask unanimous consent that the full text of this bill be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record as follows:

                                S. 1977

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

     SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Child 
     Support Reform Act of 1994''.
       (b) Reference to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this Act an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (c) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; reference; table of contents.
Sec. 2. Findings and purposes.

                  TITLE I--ESTABLISHING SUPPORT ORDERS

              Subtitle A--National Child Support Guideline

Sec. 101. Process for developing recommendations for a national child 
              support guideline for congressional approval.

    Subtitle B--Improved Procedures for Establishing Support Orders

Sec. 111. Administrative process.
Sec. 112. Evidence.
Sec. 113. Credit Reporting.

                  Subtitle C--Child Support Registries

Sec. 121. State central registries.

                 TITLE II--COLLECTIONS AND ENFORCEMENT

Sec. 201. Reporting of child support information.
Sec. 202. Occupational, professional, and business licenses.
Sec. 203. Driver's licenses and vehicle registrations.
Sec. 204. Technical correction to ERISA definition of medical child 
              support order.
Sec. 205. UIFSA endorsement.
Sec. 206. Reports to credit bureaus on persons delinquent in child 
              support payments.

            TITLE III--INTERSTATE CHILD SUPPORT ENFORCEMENT

Sec. 301. Establishment of the Office of the Assistant Commissioner for 
              Interstate Child Support Enforcement.
Sec. 302. Division of the National Registry of Child Support Orders.
Sec. 303. Division of Enforcement.
Sec. 304. State plan requirements.
Sec. 305. Definitions.

     TITLE IV--FINANCING STATE CHILD SUPPORT ENFORCEMENT ACTIVITIES

Sec. 401. Federal financial participation.
Sec. 402. Audit standards.

                        TITLE V--EFFECTIVE DATES

Sec. 501. Effective dates.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds that--
       (1) an increasing number of children live in single-parent 
     families, and these families are 4 times as likely to be poor 
     as 2-parent families;
       (2) the failure of noncustodial parents to pay their fair 
     share of child support is a major contributor to poverty 
     among single-parent families;
       (3) in 1989, only 26 percent of all single mothers received 
     a full amount of child support, and half of the mothers with 
     child support orders received either no child support or less 
     than such mothers were due;
       (4) child support cases in which the parties live in 
     different States have the worst collection rates, accounting 
     for 3 of every 10 child support cases, but only $1 of every 
     $10 of child support collected;
       (5) custodial parents in interstate cases are almost twice 
     as likely as parents in in-State cases to never receive child 
     support payments;
       (6) a more centralized system of child support enforcement 
     would help improve collections in all cases;
       (7) particularly strong measures are needed to overcome the 
     difficulties in reaching across State lines to collect child 
     support due in interstate cases;
       (8) increased Federal involvement in interstate cases would 
     relieve the States of the considerable burden of enforcing 
     child support orders when one of the parties lives in another 
     jurisdiction; and
       (9) State-by-State child support guidelines have resulted 
     in orders that vary significantly from State to State, 
     resulting in low awards and inequities for children.
       (b) Purpose.--It is the purpose of this Act to--
       (1) increase the economic security of children by creating 
     national child support guidelines;
       (2) improve the enforcement of child support awards through 
     a more centralized, efficient system and enhanced tools for 
     States to use in enforcement; and
       (3) improve the enforcement of child support orders when 
     the parties live in different States by placing 
     responsibility for enforcement in the Internal Revenue 
     Service.
                  TITLE I--ESTABLISHING SUPPORT ORDERS
              Subtitle A--National Child Support Guideline

     SEC. 101. PROCESS FOR DEVELOPING RECOMMENDATIONS FOR A 
                   NATIONAL CHILD SUPPORT GUIDELINE FOR 
                   CONGRESSIONAL APPROVAL.

       (a) Development of Implementing Bill.--
       (1) In general.--Not later than 12 months after the date of 
     the enactment of this Act, the separate organizational unit 
     established under section 452(a) of the Social Security Act 
     (42 U.S.C. 652(a)) shall submit to the Congress an 
     implementing bill with respect to the national child support 
     guideline developed under subsection (b) which contains such 
     provisions necessary or appropriate to implement such 
     guideline, either repealing or amending existing laws or 
     providing new statutory authority.
       (2) Use of advisory board.--
       (A) In general.--To assist the separate organizational unit 
     in developing an implementing bill with respect to a national 
     child support guideline, the Secretary of Health and Human 
     Services shall appoint a 9-member National Child Support 
     Guideline Advisory Board (hereafter in this paragraph 
     referred to as the ``Board''). The Board shall include--
       (i) individuals with judicial or administrative experience 
     in matters involving child support enforcement;
       (ii) individuals with knowledge of the cost of raising 
     children; and
       (iii) representatives of organizations which represent 
     custodial and noncustodial parents.
       (B) Compensation.--
       (i) In general.--Members of the Board shall serve as such 
     without pay.
       (ii) Travel expenses, etc.--Members of the Board shall be 
     allowed travel expenses, including a per diem allowance in 
     lieu of subsistence, in the same manner as persons serving 
     intermittently in the Government service are allowed travel 
     expenses under section 5703 of title 5 of the United States 
     Code.
       (b) National Child Support Guideline.--The national child 
     support guideline developed under this subsection for 
     recommendation to the Congress shall--
       (1) be used by each State as a rebuttable presumption of 
     the correct amount of support to be awarded in all judicial 
     or administrative proceedings for the establishment or 
     modification of child support;
       (2) maximize the support for children;
       (3) take into account--
       (A) the definitions of ``income'' and ``resources'' to be 
     used in applying the guideline,
       (B) the health care needs of the children, through health 
     insurance coverage or other means, and
       (C) the child care and educational needs of the children; 
     and
       (4) include the criteria a State may use in evaluating a 
     request from either parent to rebut the use of the national 
     guideline, except that issues related to visitation may not 
     be used in lowering the amount of child support to be paid.
       (c) Congressional Consideration of Implementing Bill.--
       (1) In general.--The implementing bill described in 
     subsection (a) shall be considered by the Congress under the 
     procedure for consideration described in paragraph (2).
       (2) Procedure.--
       (A) Rules of house of representatives and senate.--This 
     paragraph is enacted by Congress--
       (i) as an exercise of the rulemaking power of the House of 
     Representatives and the Senate, respectively, and as such is 
     deemed a part of the rules of each House, respectively, but 
     applicable only with respect to the procedure to be followed 
     in that House in the case of an implementing bill described 
     in subsection (a)(1), and supersedes other rules only to the 
     extent that such rules are inconsistent therewith; and
       (ii) with full recognition of the constitutional right of 
     either House to change the rules (so far as relating to the 
     procedure of that House) at any time, in the same manner and 
     to the same extent as in the case of any other rule of that 
     House.
       (B) Introduction and referral.--On the day on which the 
     implementing bill described in subsection (a)(1) is 
     transmitted to the House of Representatives and the Senate, 
     such bill shall be introduced (by request) in the House of 
     Representatives by the Majority Leader of the House, for 
     himself and the Minority Leader of the House, or by Members 
     of the House designated by the Majority Leader and Minority 
     Leader of the House and shall be introduced (by request) in 
     the Senate by the Majority Leader of the Senate, for himself 
     and the Minority Leader of the Senate, or by Members of the 
     Senate designated by the Majority Leader and Minority Leader 
     of the Senate. If either House is not in session on the day 
     on which the implementing bill is transmitted, the bill shall 
     be introduced in the House, as provided in the preceding 
     sentence, on the first day thereafter on which the House is 
     in session. The implementing bill introduced in the House of 
     Representatives and the Senate shall be referred to the 
     appropriate committees of each House.
       (C) Amendments prohibited.--No amendment to an implementing 
     bill shall be in order in either the House of Representatives 
     or the Senate and no motion to suspend the application of 
     this paragraph shall be in order in either House, nor shall 
     it be in order in either House for the Presiding Officer to 
     entertain a request to suspend the application of this 
     paragraph by unanimous consent.
       (D) Period for committee and floor consideration.--
       (i) In general.--Except as provided in clause (ii), if the 
     committee or committees of either House to which an 
     implementing bill has been referred have not reported it at 
     the close of the 90th day after its introduction, such 
     committee or committees shall be automatically discharged 
     from further consideration of the implementing bill and it 
     shall be placed on the appropriate calendar. A vote on final 
     passage of the implementing bill shall be taken in each House 
     on or before the close of the 90th day after the implementing 
     bill is reported by the committees or committee of that House 
     to which it was referred, or after such committee or 
     committees have been discharged from further consideration of 
     the implementing bill. If prior to the passage by 1 House of 
     an implementing bill of that House, that House receives the 
     same implementing bill from the other House then--

       (I) the procedure in that House shall be the same as if no 
     implementing bill had been received from the other House; but
       (II) the vote on final passage shall be on the implementing 
     bill of the other House.

       (ii) Computation of days.--For purposes of clause (i), in 
     computing a number of days in either House, there shall be 
     excluded--

       (I) the days on which either House is not in session 
     because of an adjournment of more than 3 days to a day 
     certain, or an adjournment of the Congress sine die; and
       (II) any Saturday and Sunday not excluded under subclause 
     (I) when either House is not in session.

       (E) Floor consideration in the house of representatives.--
       (i) Motion to proceed.--A motion in the House of 
     Representatives to proceed to the consideration of an 
     implementing bill shall be highly privileged and not 
     debatable. An amendment to the motion shall not be in order, 
     nor shall it be in order to move to reconsider the vote by 
     which the motion is agreed to or disagreed to.
       (ii) Debate.--Debate in the House of Representatives on an 
     implementing bill shall be limited to not more than 20 hours, 
     which shall be divided equally between those favoring and 
     those opposing the bill. A motion further to limit debate 
     shall not be debatable. It shall not be in order to move to 
     recommit an implementing bill or to move to reconsider the 
     vote by which an implementing bill is agreed to or disagreed 
     to.
       (iii) Motion to postpone.--Motions to postpone, made in the 
     House of Representatives with respect to the consideration of 
     an implementing bill, and motions to proceed to the 
     consideration of other business, shall be decided without 
     debate.
       (iv) Appeals.--All appeals from the decisions of the Chair 
     relating to the application of the Rules of the House of 
     Representatives to the procedure relating to an implementing 
     bill shall be decided without debate.
       (v) General rules apply.--Except to the extent specifically 
     provided in the preceding provisions of this subparagraph, 
     consideration of an implementing bill shall be governed by 
     the Rules of the House of Representatives applicable to other 
     bills and resolutions in similar circumstances.
       (F) Floor consideration in the senate.--
       (i) Motion to proceed.--A motion in the Senate to proceed 
     to the consideration of an implementing bill shall be 
     privileged and not debatable. An amendment to the motion 
     shall not be in order, nor shall it be in order to move to 
     reconsider the vote by which the motion is agreed to or 
     disagreed to.
       (ii) General debate.--Debate in the Senate on an 
     implementing bill, and all debatable motions and appeals in 
     connection therewith, shall be limited to not more than 20 
     hours. The time shall be equally divided between, and 
     controlled by, the Majority Leader and the Minority Leader or 
     their designees.
       (iii) Debate of motions and appeals.--Debate in the Senate 
     on any debatable motion or appeal in connection with an 
     implementing bill shall be limited to not more than 1 hour, 
     to be equally divided between, and controlled by, the mover 
     and the manager of the implementing bill, except that in the 
     event the manager of the implementing bill is in favor of any 
     such motion or appeal, the time in opposition thereto, shall 
     be controlled by the Minority Leader or his designee. Such 
     leaders, or either of them, may, from time under their 
     control on the passage of an implementing bill, allot 
     additional time to any Senator during the consideration of 
     any debatable motion or appeal.
       (iv) Other motions.--A motion in the Senate to further 
     limit debate is not debatable. A motion to recommit an 
     implementing bill is not in order.
       (d) Resubmissions.--If an implementing bill submitted under 
     subsection (a)(1) is not approved by the Congress or is 
     vetoed by the President (and such veto is not overridden by 
     the Congress), the separate organizational unit shall 
     resubmit a new implementing bill not later than 90 days after 
     the Congress failed to approve such bill or failed to 
     override the President's veto, and such new implementing bill 
     shall be subject to congressional consideration as provided 
     in subsection (c).
    Subtitle B--Improved Procedures for Establishing Support Orders

     SEC. 111. ADMINISTRATIVE PROCESS.

       Section 466(a)(2) (42 U.S.C. 666(a)(2)) is amended to read 
     as follows:
       ``(2) Procedures under which expedited administrative 
     processes are used to establish paternity in contested cases 
     and to obtain and enforce support orders in all cases. The 
     Secretary may waive the provisions of this paragraph with 
     respect to one or more political subdivisions within the 
     State on the basis of the effectiveness and timeliness of 
     support order issuance and enforcement or paternity 
     establishment within the political subdivision (in accordance 
     with the general rule for exemptions under subsection 
     (d)).''.

     SEC. 112. EVIDENCE.

       (a) National Subpoena Duces Tecum.--Section 452(a) (42 
     U.S.C. 652(a)) is amended by striking ``and'' at the end of 
     paragraph (9), by redesignating paragraph (10) as paragraph 
     (11), and by inserting after paragraph (9) the following new 
     paragraph:
       ``(10) draft and distribute a national subpoena duces tecum 
     for use by child support litigants to obtain income 
     information pertaining to all private, Federal, State, and 
     local government employees, as well as any receivers of 
     income; and''.
       (b) State Standards.--Section 466(a) (42 U.S.C. 666(a)) is 
     amended by inserting after paragraph (11) the following new 
     paragraph:
       ``(12)(A) Procedures which require any unit of government, 
     person, or corporation doing business in the State to accept 
     and honor a subpoena duces tecum developed pursuant to 
     section 452(a)(10).
       ``(B) Procedures which enforce through a hearing such a 
     subpoena served in the State, at which hearing the burden of 
     specifying the reasons for not timely honoring the subpoena 
     rests with the non-complying person or entity.
       ``(C) Procedures for the introduction in any judicial or 
     administrative child support proceeding of information 
     contained in the response to such a subpoena without the need 
     for further verification.''.

     SEC. 113. CREDIT REPORTING.

       Section 604 of the Consumer Credit Protection Act (15 
     U.S.C. 1681b) is amended by adding at the end the following 
     new paragraph:
       ``(4) To an agency administering a State plan under section 
     454 of the Social Security Act (42 U.S.C. 654) to use the 
     information relevant to the setting of an initial or modified 
     child support award, without the necessity of a court 
     order.''.
                  Subtitle C--Child Support Registries

     SEC. 121. STATE CENTRAL REGISTRIES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by section 
     112, is amended by inserting after paragraph (12) the 
     following new paragraph:
       ``(13)(A) Procedures under which the State shall maintain 
     by not later than July 1, 1996, a central child support order 
     registry which shall include each child support order issued 
     or modified in the State. Except in the case of a child 
     support order being enforced under section 303 of the Child 
     Support Reform Act of 1994, the State shall, through the 
     registry, receive, record, and disburse payment under each 
     such child support order.
       ``(B) Procedures under which the State prepares and 
     transmits within 5 days of entry into the central State child 
     support registry, an abstract of each order maintained in 
     such registry, to the National Registry of Child Support 
     Orders established under section 301 of the Child Support 
     Reform Act of 1994. The abstract shall contain such 
     information as required by the Secretary of the Treasury 
     pursuant to regulations issued under section 301(b) of such 
     Act.''.
                 TITLE II--COLLECTIONS AND ENFORCEMENT

     SEC. 201. REPORTING OF CHILD SUPPORT INFORMATION.

       (a) W-4 Reporting Requirement.--
       (1) In general.--The Secretary of the Treasury, in 
     consultation with the Secretary of Labor, shall require--
       (A) all employees to file a new W-4 form with their 
     employers within 5 calendar days after the latest of--
       (i) October 1, 1996,
       (ii) the date the employee is hired, or
       (iii) the date any information specified under paragraph 
     (2) is no longer accurate; and
       (B) all employers to provide a copy of every employee's W-4 
     form to the National Registry of Child Support Orders 
     established under section 301 of this Act.
       (2) Expanded use of form.--The Secretary of the Treasury 
     shall modify the W-4 form to be completed by an employee to 
     enable the employee to indicate on the form--
       (A) whether the employee has a legal obligation to provide 
     child support (as defined in section 462(b) of the Social 
     Security Act (42 U.S.C. 662(b)) which is to be collected, in 
     whole or in part, through wage withholding pursuant to an 
     order issued by a State court or an order of an 
     administrative process established under State law; and
       (B) if so--
       (i) the aggregate amount of all such obligations,
       (ii) the name and address of any person to whom the 
     employee has such an obligation, and
       (iii) whether the payment of such obligation has been 
     previously remitted to the National Registry of Child Support 
     Orders established under section 301 of this Act.
       (b) Employer Obligations.--
       (1) In general.--Subtitle C of the Internal Revenue Code of 
     1986 (relating to employment taxes) is amended by inserting 
     after chapter 24 the following new chapter:

  ``CHAPTER 24A--COLLECTION OF CHILD SUPPORT OBLIGATIONS AT SOURCE ON 
                                 WAGES

``Sec. 3411. Child support obligations collected at source.

     ``SEC. 3411. CHILD SUPPORT OBLIGATIONS COLLECTED AT SOURCE.

       ``(a) Requirement of Withholding.--
       ``(1) Wage withholding as indicated by the employee.--
     Except as provided in paragraph (2), each employer who 
     receives a completed W-4 form from an employee pursuant to 
     section 201(a)(2) of the Child Support Reform Act of 1994 
     which indicates that the employee has a legal obligation to 
     provide child support (as defined in section 462(b) of the 
     Social Security Act) which is payable through wage 
     withholding shall--
       ``(A) deduct and withhold from the wages of the employee 
     the amount indicated on the W-4 form as a child support 
     obligation; and
       ``(B) send such amount to--
       ``(i) the appropriate central State child support order 
     registry established under section 466(a)(13)(A) of the 
     Social Security Act, or
       ``(ii) the National Registry of Child Support Orders 
     established under section 301 of the Child Support Reform Act 
     of 1994, if notified pursuant to the employee's W-4 or 
     section 302(4) of such Act.
       ``(2) Correction of withholding instructions.--If the 
     central State child support order registry or the National 
     Registry of Child Support Orders notifies the employer that 
     an employee has an obligation unreported or misreported on 
     the employee's W-4, the employer shall--
       ``(A) deduct and withhold from the wages of the employee 
     the amount that such registry indicates is to be deducted and 
     withheld from the wages of the employee to satisfy such 
     obligation; and
       ``(B) send the amount so withheld to such registry.
       ``(b) Liability for Payment.--The employer shall be liable 
     for the payment of amounts deducted and withheld under 
     subsection (a) to the appropriate registry.
       ``(c) Special Rules.--For purposes of this chapter (and so 
     much of subtitle F as relates to this chapter), any amount 
     required to be deducted and withheld under this section shall 
     be treated as if it were a tax withheld under chapter 24 and 
     rules similar to the rules of chapter 24 shall apply.''.
       (2) Clerical amendment.--The table of chapters for subtitle 
     C of such Code is amended by inserting after the item 
     relating to chapter 24 the following new item:
``Chapter 24A. Child support obligations collected at source.''.

     SEC. 202. OCCUPATIONAL, PROFESSIONAL, AND BUSINESS LICENSES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by section 
     121, is amended by inserting after paragraph (13) the 
     following new paragraph:
       ``(14) Procedures under which the State occupational 
     licensing and regulating departments and agencies may not 
     issue or renew an occupational, professional, or business 
     license of--
       ``(A) a noncustodial parent who is the subject of an 
     outstanding failure to appear warrant, capias, or bench 
     warrant related to a child support proceeding that appears on 
     the State's crime information system or the National Registry 
     of Child Support Orders established under section 301 of the 
     Child Support Reform Act of 1994, until removed from the 
     system or Registry; and
       ``(B) a noncustodial parent who is delinquent in such 
     parent's child support obligation in an amount at least equal 
     to the support payable for one month, as recorded in the 
     central State child support order registry established under 
     paragraph (13)(A) or the National Registry of Child Support 
     Orders established under section 301 of the Child Support 
     Reform Act of 1994, until--
       ``(i) the pro se obligee, the obligee's attorney, a State 
     prosecutor responsible for child support enforcement, or the 
     Division of Enforcement established under such section 301 
     consents to the release of the hold on the license,
       ``(ii) a court or administrative agency that is responsible 
     for the order's enforcement orders the release of the hold on 
     the license, or
       ``(iii) an expedited inquiry and review is completed while 
     such parent is granted a 30-day temporary license.''.

     SEC. 203. DRIVER'S LICENSES AND VEHICLE REGISTRATIONS.

       Section 466(a) (42 U.S.C. 666(a)), as amended by section 
     202, is amended by inserting after paragraph (14) the 
     following new paragraph:
       ``(15) Procedures under which the State motor vehicle 
     department--
       ``(A) may not issue or renew a driver's license (other than 
     a temporary license of not more than 60-days duration) of any 
     noncustodial parent who is the subject of an outstanding 
     failure to appear warrant, capias, or bench warrant related 
     to a child support proceeding that appears on the State's 
     crime information system or the National Registry of Child 
     Support Orders established under section 301 of the Child 
     Support Reform Act of 1994, until removed from the system or 
     Registry;
       ``(B) may not issue or renew a driver's license or vehicle 
     registration (other than temporary) of any noncustodial 
     parent who is delinquent in such parent's child support 
     obligation in an amount at least equal to the support payable 
     for one month, as recorded in the central State child support 
     order registry established under paragraph (13)(A) or the 
     National Registry of Child Support Orders established under 
     section 301 of the Child Support Reform Act of 1994, until--
       ``(i) the pro se obligee, the obligee's attorney, a State 
     prosecutor responsible for child support enforcement, or the 
     Division of Enforcement established under such section 301 
     consents to the release of the hold on the license or 
     registration,
       ``(ii) a court or administrative agency that is responsible 
     for the order's enforcement orders the release of the hold on 
     the license or registration, or
       ``(iii) an expedited inquiry and review is completed while 
     such parent is granted a 30-day temporary license or 
     registration; and
       ``(C) upon receiving notice that an individual holds a 
     State driver's license or vehicle registration who is the 
     subject of a warrant related to a child support proceeding--
       ``(i) issues a show cause order to such individual asking 
     such individual to demonstrate why such individual's driver's 
     license or vehicle registration ought not be suspended until 
     the warrant is removed by the court responsible for issuing 
     the warrant, and
       ``(ii) in cases in which a show cause order pursuant to 
     clause (i) has been issued, may grant a temporary license or 
     vehicle registration to such individual pending the show 
     cause hearing or the removal of the warrant, whichever occurs 
     first.''.

     SEC. 204. TECHNICAL CORRECTION TO ERISA DEFINITION OF MEDICAL 
                   CHILD SUPPORT ORDER.

       (a) In General.--Section 609(a)(2)(B) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1169(a)(2)(B)) is amended--
       (1) by striking ``issued by a court of competent 
     jurisdiction'';
       (2) by striking the period at the end of clause (ii) and 
     inserting a comma; and
       (3) by adding, after and below clause (ii), the following:

     ``if such judgment, decree, or order (I) is issued by a court 
     of competent jurisdiction or (II) is issued by an 
     administrative adjudicator and has the force and effect of 
     law under applicable State law.''.
       (b) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Plan amendments not required until january 1, 1995.--
     Any amendment to a plan required to be made by an amendment 
     made by this section shall not be required to be made before 
     the first plan year beginning on or after January 1, 1995, 
     if--
       (A) during the period after the date before the date of the 
     enactment of this Act and before such first plan year, the 
     plan is operated in accordance with the requirements of the 
     amendments made by this section, and
       (B) such plan amendment applies retroactively to the period 
     after the date before the date of the enactment of this Act 
     and before such first plan year.

     A plan shall not be treated as failing to be operated in 
     accordance with the provisions of the plan merely because it 
     operates in accordance with this paragraph.

     SEC. 205. UIFSA ENDORSEMENT.

       Section 466 (42 U.S.C. 666) is amended by adding at the end 
     the following new subsection:
       ``(f) In order to satisfy section 454(20)(A), each State 
     must have in effect by January 1, 1996, laws which adopt 
     without material change the officially approved version of 
     the Uniform Interstate Family Support Act adopted by the 
     National Conference of Commissioners on Uniform State Laws 
     and approved by the American Bar Association House of 
     Delegates on February 9, 1993.''.

     SEC. 206. REPORTS TO CREDIT BUREAUS ON PERSONS DELINQUENT IN 
                   CHILD SUPPORT PAYMENTS.

       (a) In General.--Section 466(a)(7) (42 U.S.C. 666(a)(7)) is 
     amended to read as follows:
       ``(7) Procedures requiring the State to provide to each 
     consumer reporting agency (as defined in section 603(f) of 
     the Fair Credit Reporting Act (15 U.S.C. 1681a(f))) 
     information regarding the amount of overdue support owed by 
     any absent parent who resides in the State.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on October 1, 1994.
            TITLE III--INTERSTATE CHILD SUPPORT ENFORCEMENT

     SEC. 301. ESTABLISHMENT OF THE OFFICE OF THE ASSISTANT 
                   COMMISSIONER FOR INTERSTATE CHILD SUPPORT 
                   ENFORCEMENT.

       (a) In General.--For purposes of locating absent parents 
     and facilitating the enforcement of child support 
     obligations, the Secretary of the Treasury shall establish 
     within the Internal Revenue Service an Office of the 
     Assistant Commissioner for Interstate Child Support 
     Enforcement which shall establish not later than July 1, 
     1996--
       (1) a Division of the National Registry of Child Support 
     Orders for the purpose of carrying out the duties described 
     in section 302; and
       (2) a Division of Enforcement for the purpose of carrying 
     out the duties described in section 303.
       (b) Coordination.--The Secretary of the Treasury, in 
     consultation with the Secretary of Health and Human Services 
     shall issue regulations for the coordination of activities 
     among the Office of the Assistant Commissioner for Interstate 
     Child Support Enforcement, the Assistant Secretary for 
     Children and Families, and the States, to facilitate the 
     purposes of this title.

     SEC. 302. DIVISION OF THE NATIONAL REGISTRY OF CHILD SUPPORT 
                   ORDERS.

       With respect to the Division of the National Registry of 
     Child Support Orders (hereafter in this title referred to as 
     the ``Registry''), the duties described in this section are 
     as follows:
       (1) Retain an abstract of all child support orders issued 
     or modified by the States, including the names, social 
     security numbers, and addresses of the parties, the amount of 
     the order, whether the order is being enforced under the 
     State plan approved under part D of title IV of the Social 
     Security Act (42 U.S.C. 651 et seq.), and such other 
     information as the Secretary of Treasury, in consultation 
     with the Secretary of Health and Human Services, shall, by 
     regulation, require.
       (2) Promptly notify the Division of Enforcement whenever 
     the Registry receives notice from a State that an order being 
     enforced by the Division of Enforcement has been modified, 
     specifying which terms of such order are modified.
       (3)(A) Receive from employers the reports required under 
     section 201(a)(1) of this Act, match such reports against the 
     abstracts contained in the Registry, confirm that support is 
     owed, to whom such support is owed, and in what amount, and 
     report any corrections to the employers.
       (B) Upon receipt of such a report--
       (i) if the employee is subject to a child support order, 
     retain the information contained in such report with respect 
     to such employee; and
       (ii) if the employee is not subject to a child support 
     order, promptly destroy such information.
       (C) Upon receipt of such a report--
       (i) if both parents reside in the same State and the child 
     support order has not been previously referred to the 
     Division of Enforcement, report to the appropriate central 
     State child support order registry established under section 
     466(a)(13)(A) of the Social Security Act (42 U.S.C. 
     666(a)(13)(A)), the name, address, social security number, 
     and date of birth of the employee, the employer's name and 
     address, the employee's date of hire, and any other 
     information obtained which would be useful in enforcing the 
     child support order according to its terms;
       (ii) if the parents reside in different States and the 
     order has not been previously referred to the Division of 
     Enforcement, refer the order for interstate enforcement to 
     the Division of Enforcement; and
       (iii) if the order has been previously referred to the 
     Division of Enforcement, refer the information specified in 
     clause (i) to the Division of Enforcement.
       (4) If an order is referred to the Division of Enforcement 
     by the Registry under paragraph (3)(C)(ii) or by a State 
     child support enforcement agency under section 454(26) of the 
     Social Security Act (42 U.S.C. 654(26))--
       (A) notify the custodial and noncustodial parents of such 
     referral; and
       (B) notify the employer to remit all child support payments 
     to the Registry, receive all child support payments made 
     pursuant to the order, record such payments, and promptly 
     disburse the funds--
       (i) in cases where there is an assignment of rights under 
     section 402(a)(26) of the Social Security Act (42 U.S.C. 
     602(a)(26)), in accordance with section 457(b) of such Act 
     (42 U.S.C. 657(b)), and
       (ii) in all other cases, to the custodial parent.

     SEC. 303. DIVISION OF ENFORCEMENT.

       (a) In General.--With respect to the Division of 
     Enforcement, the duties described in this section are as 
     follows:
       (1) Enforce all child support orders referred to the 
     Division of Enforcement--
       (A) under section 302(3)(C)(ii);
       (B) by a State child support enforcement agency under 
     section 454(26) of the Social Security Act (42 U.S.C. 
     654(26)); and
       (C) under section 452(b) of the Social Security Act (42 
     U.S.C. 652(b)).
       (2) Enforce a child support order in accordance with the 
     terms of the abstract contained in the Registry pursuant to 
     section 302(1) or the modified terms of such an order upon 
     notification of such modifications by the Registry under 
     section 302(2).
       (3) Enforce medical support provisions of any child support 
     order using any means available under State or Federal law.
       (4) Receive and process requests for Federal income 
     intercept made in accordance with section 464 of the Social 
     Security Act (42 U.S.C. 664).

     With respect to orders referred to the Division of 
     Enforcement under subparagraph (A) or (B) of paragraph (1), 
     once the referral is made, the Division of Enforcement shall 
     retain responsibility for enforcement even if the parties 
     resume residence in the same State.
       (b) Failure To Pay Amount Owing.--With respect to any child 
     support order being enforced by the Division of Enforcement, 
     if an individual fails to pay the full amount required to be 
     paid on or before the due date for such payment, the Office 
     of the Assistant Commissioner for Interstate Child 
     Enforcement, through the Division of Enforcement, may assess 
     and collect the unpaid amount in the same manner, with the 
     same powers, and subject to the same limitations applicable 
     to a tax imposed by subtitle C of the Internal Revenue Code 
     of 1986 the collection of which would be jeopardized by 
     delay.
       (c) Use of Federal Courts.--The Office of the Assistant 
     Commissioner for Interstate Child Enforcement, through the 
     Division of Enforcement, may utilize the courts of the United 
     States to enforce child support orders against absent parents 
     upon a finding that--
       (1) the order is being enforced by the Division of 
     Enforcement; and
       (2) utilization of such courts is a reasonable method of 
     enforcing the child support order.
       (d) Conforming Amendments.--
       (1) Section 452(a)(8) (42 U.S.C. 652(a)(8)) is repealed.
       (2) Section 452(c) (42 U.S.C. 652(c)) is repealed.

     SEC. 304. STATE PLAN REQUIREMENTS.

       Section 454 (42 U.S.C. 654) is amended by striking ``and'' 
     at the end of paragraph (23), by striking the period at the 
     end of paragraph (24) and inserting a semicolon, and by 
     inserting after paragraph (24) the following new paragraphs:
       ``(25) provide that the State will cooperate with the 
     Office of the Assistant Commissioner for Interstate Child 
     Support Enforcement to facilitate the exchange of information 
     regarding child support cases and the enforcement of orders 
     by the Commissioner; and
       ``(26) provide that the State child support enforcement 
     agency shall refer for enforcement to the Division of 
     Enforcement established under section 301 of the Child 
     Support Reform Act of 1994 any child support order if an 
     amount equal to at least 1 month's support is in arrears and 
     the State believes the parties reside in different States.''.

     SEC. 305. DEFINITIONS.

       Any term used in this title which is also used in part D of 
     title IV of the Social Security Act (42 U.S.C. 651 et seq.) 
     shall have the meaning given such term by such part.
     TITLE IV--FINANCING STATE CHILD SUPPORT ENFORCEMENT ACTIVITIES

     SEC. 401. FEDERAL FINANCIAL PARTICIPATION.

       (a) In General.--Section 455(a) (42 U.S.C. 655(a)) is 
     amended--
       (1) at the end of paragraph (1), by adding the following 
     new sentence: ``For fiscal year 1995 and thereafter, no 
     amount shall be paid to any State under this section unless 
     the amounts expended by such State during such year for the 
     operation of the plan approved under this part are not less 
     than such amounts expended by such State in fiscal year 
     1994.''; and
       (2) in paragraph (2), by striking ``and'' at the end of 
     subparagraph (B) and by striking subparagraph (C) and 
     inserting the following new subparagraphs:
       ``(C) 66 percent for fiscal years 1990, 1991, 1992, 1993, 
     and 1994, and
       ``(D) 85 percent for fiscal year 1995 and each fiscal year 
     thereafter.''.
       (b) Repeal of Incentive Payments to States.--Section 458 
     (42 U.S.C. 658) is repealed.

     SEC. 402. AUDIT STANDARDS.

       (a) Establishment of Committee.--
       (1) In general.--The Secretary (hereafter in this section 
     referred to as the ``Secretary'') shall establish a Child 
     Support Audit Advisory Committee (hereafter in this section 
     referred to as the ``Committee'').
       (2) Membership.--
       (A) Number of members.--The Secretary shall determine the 
     number of members on the Committee.
       (B) Appointment.--The members of the Committee shall be 
     appointed by the Secretary and shall include representatives 
     of directors of State child support enforcement programs 
     operating under part D of title IV of the Social Security Act 
     (42 U.S.C. 651 et seq.), recipients of child support 
     enforcement services, and independent management consultants.
       (3) Duties of the committee.--The Committee shall assist 
     the Secretary in preparing revised audit criteria to be used 
     pursuant to section 452(a)(4) of the Social Security Act (42 
     U.S.C. 652(a)(4)) based on--
       (A) common data elements which are defined, collected, and 
     reported in a uniform manner from each State;
       (B) numeric measures of program outcomes in locating absent 
     parents establishing paternity, obtaining child support 
     orders, periodically modifying such orders, and enforcing 
     such orders, and enforcing such orders (including orders for 
     health insurance coverage);
       (C) numeric measures for assessing compliance with the 
     regulations issued by the Secretary pursuant to subsections 
     (h) and (i) of section 452 of such Act (42 U.S.C. 652); and
       (D) a definition of substantial compliance with such 
     criteria.
       (4) Compensation.--
       (A) In general.--Members of the Committee shall serve 
     without compensation.
       (B) Expenses, etc., reimbursed.--The members of the 
     Committee may be allowed travel expenses while on the 
     business of the Committee, including per diem in lieu of 
     subsistence, as authorized by section 5703 of title 5, United 
     States Code, for persons employed intermittently in 
     Government service.
       (5) Application of act.--The provisions of the Federal 
     Advisory Committee Act shall not apply with respect to the 
     Committee.
       (6) Support.--The Secretary shall supply such necessary 
     office facilities, office supplies, support services, and 
     related expenses as necessary to carry out the functions of 
     the Committee.
       (7) Timing.--The Secretary shall--
       (A) not later than 60 days after the date of the enactment 
     of this Act establish the Committee; and
       (B) not later than 180 days after such date issue a notice 
     of proposed rulemaking with respect to the audit standards 
     required by this subsection, and, after allowing not less 
     than 45 days for public comment, issue final regulations not 
     later than 270 days after the date of the enactment of this 
     Act, to be effective beginning 1 year after the date of the 
     issuance of such regulations.
       (b) Compliance Enforcement.--
       (1) In general.--Section 403(h)(1) (42 U.S.C. 603(h)(1)) is 
     amended--
       (A) by striking ``part D'' and inserting ``this part''; and
       (B) by striking ``by--'' and all that follows and inserting 
     ``by not less than 5 percent nor more than 10 percent.''.
       (2) Redesignation.--Title IV is amended--
       (A) by redesignating subsection (h) of section 403 (42 
     U.S.C. 603), as amended by paragraph (1), as subsection (f); 
     and
       (B) by relocating subsection (f) (as so redesignated) 
     immediately following subsection (e) of section 455 (42 
     U.S.C. 655).
                        TITLE V--EFFECTIVE DATES

     SEC. 501. EFFECTIVE DATES.

       (a) In General.--Except as otherwise provided in this Act 
     or subsection (b), the amendments made by this Act shall take 
     effect on the date of the enactment of this Act.
       (b) Special Rule.--In the case of a State that the 
     Secretary of Health and Human Services determines requires 
     State legislation (other than legislation appropriating 
     funds) in order to meet the additional requirements imposed 
     by the amendments made by this Act, the State shall not be 
     regarded as failing to comply with the requirements of such 
     amendments before the first day of the first calendar quarter 
     beginning after the close of the first regular session of the 
     State legislature that begins after the date of enactment of 
     this Act. For purposes of this subsection, in the case of a 
     State that has a 2-year legislative session, each year of the 
     session shall be treated as a separate regular session of the 
     State legislature.
                                 ______

      By Mr. ROTH:
  S. 1978. A bill to amend part III of title 5, United States Code, to 
provide for participation by non-Federal employees in health benefits 
plans under the Federal Employees Health Benefits Program, and for 
other purposes; to the Committee on Government Affairs.


                   Federal Health Care Expansion Act

 Mr. ROTH. Mr. President, I rise today to introduce legislation 
entitled the Federal Health Care Expansion Act--or ``FedCare'' to 
increase access and availability to health care coverage across the 
Nation. I hope my proposal will be considered as part of comprehensive 
national health care reform. With the introduction of this legislation 
I am looking forward to receiving comments and suggestions on this 
draft.
  My proposal will not create new government bureaucracies, increase 
taxes, or impose mandates on businesses, and, it will not increase the 
deficit. Rather, FedCare will provide small businesses and self-
employed individuals an affordable alternative for insuring the health 
of their workers and their families. My proposal could immediately help 
us address the largest problem in our current health care system--the 
lack of access to affordable coverage for the 20 million uninsured 
individuals who are working or in a family where someone is working for 
a business which has 1 to 100 employees. FedCare is based on a system 
with a proven track record, a system that is working now: and it will 
serve as a bridge in our transition to national health care reform.
  There is consensus that the Federal Employees Health Benefits Program 
[FEHBP] is a model health care system. The President, First Lady, many 
health care experts, economists, and federal employees point to FEHBP 
as a program that works well. Since legislation in 1959 established the 
world's largest private voluntary health insurance network, millions of 
federal workers, retirees and their dependents have benefited from 
health insurance coverage provided through the FEHBP. In my view, it 
makes little sense to eliminate a program that has proven successful.
  My proposal is a four point concept which would feasibly provide 
affordable quality health care coverage to millions of working 
uninsured Americans and their families. This proposal will make 
available to millions of Americans the same health care plan that is 
available to Members of Congress, Supreme Court Justices, members of 
the President's Cabinet, and millions of federal employees, retirees, 
and their dependents. While the President and others point to the 
Federal Employee Health Benefits Program [FEHBP] as a model for health 
care reform, I view the FEHBP as even more, a practical place to 
actually begin building our Nation's future health care system.
  I was, in fact, troubled to see that the Administration and other 
comprehensive health care plans either terminate the FEHBP or simply 
overlook it. I would start reforming our health care system by 
extending this coverage. I believe that this approach would benefit 
both the currently enrolled Federal workers, retirees and their 
dependents as well as those who would be eligible to join by buying-in 
to the program.

  Under my proposal, FEHBP participating fee-for-service and health 
maintenance organization plans would be available for buy-in by small 
businesses of 1 to 100 employees--including the self-employed--at the 
same premium price available to Federal enrollees (plus, if 
demonstrated that there is a need, a small administrative add-on to the 
premium). In order to minimize adverse risk selection, this buy-in 
would occur in a reformed marketplace with enactment of small group 
insurance market reform. The cost of the buy-in would be made 
affordable to self-employed individuals by increasing to 100 percent 
the deductibility of contributions towards health premiums, and for 
low-wage workers, a subsidy voucher program would place insurance 
coverage within affordable reach. These combined measures would make 
quality and affordable health insurance coverage accessible across the 
nation, and, as the insurance plans will allow workers to retain their 
coverage when they change jobs, the problem for many of ``job-lock'' 
caused by fear of losing insurance coverage is addressed.
  FedCare addresses two fundamental flaws in our health care system 
affecting small business. These flaws are the inability of small groups 
to negotiate in the health care market, and the lack of choice these 
groups have either because they can not obtain adequate health care 
coverage or because they can not afford the coverage. Giving small 
businesses FedCare access to the FEHBP addresses the negotiating 
problems. It extends to small business the purchasing power of the 
largest privately insured pool of individuals--the 9 million enrolled 
individuals in the over 300 private insurance plans in virtually every 
locality in the nation. Establishing the FedCare national subsidy 
voucher program enables small businesses to make more and better 
choices in health care coverage.
  The US health care marketplace is halfway competitive. Our current 
health care system is a product of government intervention and skewed 
market incentives--which ultimately do not give us as good a value for 
our health care dollar as the system could yield. The private health 
care marketplace is fractured as big business self-insures their 
employees, and small businesses are left with little strength in the 
marketplace to negotiate the value of health care coverage for their 
employees. Since our hospitals can't turn people away from their 
emergency rooms, each time an uninsured person is treated, the costs 
are shifted to those who are insured. In fact, this shift in the 
payment of the bill is called ``cost-shifting.'' In a report issued 
earlier this year by the Delaware Cost Containment Commission the 
following illustrated the extent of the problem in my state:

       Recent figures from Blue Cross and Blue Shield of Delaware 
     estimate that for every dollar of net revenue generated by 
     hospitals, $1.60 must be charged. The extra $.60 
     constitutes a ``hidden tax'' to compensate hospitals for 
     care provided to the uninsured and to Medicare and 
     Medicaid patients for whom reimbursement is inadequate.

  Ultimately, the greatest effect of this cost-shifting is felt on that 
segment of the marketplace which is least able to negotiate--the small 
businesses in the nation. In an entirely voluntary system, Americans 
have reached a rate of over 85 percent insured population, yet the 
overwhelming majority are working and would be insured if they had 
access to care and if it was within their financial reach. Today, 
almost 20 million of the 38 million uninsured individuals are working 
or in a family where someone is working for a business which has 1 to 
100 employees.
  Clearly, it's not a fair game for small businesses seeking insurance 
coverage for their workers. I have heard from hundreds of small 
business owners who are faced with high health insurance premiums, but 
who struggle to meet the needs of providing insurance coverage to all 
of their employees. These businesses have told me that they will 
continue to provide health care coverage in the future because they 
feel it is important to them and to their workers. However, these very 
same business owners are very concerned with what the government may 
mandate. It is essential that we remember, big businesses are small 
businesses that have succeeded. In an economic recovery where there is 
slow job growth, employer mandates could end up hurting those intended 
to be helped and put more people out of work.
  I propose four basic steps that would move us forward in making basic 
health care available to the 20 million working Americans and their 
families who do not have coverage, and contain the escalating costs of 
health care for those already covered. These four steps are:
  First, provide access to real quality health care coverage by 
opening-up the Federal Employee Health Benefits Program to small 
businesses. This would give small businesses the purchasing power of 
the largest pool of privately insured individuals in the nation, and 
the choice of selecting among over 300 insurance plans now offered 
under FEHBP where there is a great deal of choice in health coverage 
and range in price;
  Second, level the playing field in the insurance market by enacting 
insurance market reform to eliminate pre-existing exclusions, guarantee 
portability, guarantee issue and guarantee renewability of health care 
coverage;
  Third, establish equity for self-employed individuals by permanently 
establishing 100 percent deductibility of the cost of insurance 
premiums; and
  Fourth, make the buy-in to FEHBP affordable to low-wage workers and 
their families by shifting current Medicare and Medicaid 
Disproportionate Share payments to a voucher subsidy program.

  I believe we should begin reform of our health care system with a 
system we know works by building on the strengths of FEHBP. Currently, 
there are over 300 health care plans offered to the 9 million Federal 
workers, retirees and their dependents. The type of health care 
coverage ranges from a national fee-for-service plan to local health 
maintenance organizations [HMOs].
  So far, the FEHBP has done a respectable job at keeping costs down. 
In fact, in 1994, the average premium increase for all the plans was 
only 3 percent, and over 40 percent of enrolled premium holders saw a 
decrease in their premiums from last year to this year. Approximately 9 
million individuals are insured under FEHBP's voluntary health 
insurance program. Of the 9 million, 2.4 million are Federal employees, 
of whom about 680,000 work for the U.S. Postal Service; 1.6 million 
retirees and surviving dependents; and about 4.7 million dependents of 
employees and retirees. Currently, about 72 percent of the health 
premiums are subsidized for Federal enrollees. The Office of Personnel 
Management which oversees the administration of the FEHBP, has a staff 
of only about 164 individuals who negotiate and contract and administer 
the program. Clearly, this is not a bloated bureaucracy. Some have 
pointed out that OPM works as a purchasing cooperative for the 9 
million Federal enrollees.
  Choice among the many FEHBP plans gives enrollees the opportunity to 
select the plan that most closely matches expected need of medical 
services and desired level of contribution. Current law already 
includes a list of benefits that all FEHBP plans must offer in order to 
participate. In essence, this list serves to ensure that there is a 
uniform core level of benefits offered across the boards in all the 
plans, yet still leaves some flexibility in benefits. The following is 
a detailed description of how my concept would provide access to 
affordable health care to millions of working uninsured families across 
the nation.


       i. open-up over 300 fehbp plans for small business buy-in

  Under FedCare, the Office of Personnel Management [OPM] will retain 
its role as the administering entity of FEHBP. Both the benefits and 
government contributions will remain the same in order to minimize 
disruption in the transition from the current FEHBP to the buy-in 
feature. There would only be one significant change for Federal 
workers, and that is the addition of an extended health coverage 
portability option.
  Currently, Federal workers leaving the Federal Government prior to 
retirement can find themselves in much the same predicament of losing 
their health care coverage when they change jobs as those in the 
private sector. There are some current law protections allowing for 
continuation of coverage after employment, but the time is limited in 
many cases to 18 months. FedCare incorporates a portability option for 
federal workers leaving the federal government prior to retirement to 
continue their coverage for 3 years. Federal workers under this 
portability option may stay enrolled with the carrier of their choice 
at the full cost of the premium at the group rate--plus a small 
administrative add-on to the premium--without the government 
contribution subsidy. Enrollees will continue to be considered as part 
of the active group for rating purposes.

  Contracts for insurance carriers would be awarded to all carriers 
meeting three criteria: First, the quality and benefits standards 
already in statute, second, that the carrier (with the exception of 
current exclusive membership plan) agrees to offer the same benefits 
and premium to small business employees enrolling, and third, a minimum 
number of private small business employees would have to join the plan. 
The current law requirement that at least 300 federal employees, 
retirees, and/or their dependents participate in an insurance plan for 
it to remain in FEHBP is retained.
  To open-up FEHBP so that all participating plans are open for 
enrollment by firms of 1 to 100 employees, including self-employed 
individuals, at the same premium rate as for Federal enrollees, the 
phase-in of the private sector buy-in would happen at the onset. By the 
third year of implementation, all employers with 1 to 100 employees are 
eligible to enroll in a plan unless there are capacity issues.
  A small business will have the option to enroll its employees where 
there is an FEHBP plan in the designated area. Although small business 
is defined as 1 to 100 employees, the legislation does establish a 
study to see how to address the non-working uninsured as well as 
workers enrolled in larger sized businesses. The employer will not be 
mandated to match or contribute towards the employee cost of premiums, 
although the legislation will not preclude an employer from 
contributing towards a portion of the premiums. To reduce 
administrative costs, all participating employers will be responsible 
for collecting the premiums from employees to pay the carrier directly.
  The structure of the phase-in begins in the first year that all plans 
contracted to provide FEHBP coverage would be required to open up their 
enrollment by a minimum of 2 percent of the size of the enrolled 
federal enrollee group. The plans would then be required to meet 
certain minimum private sector enrollee growth targets. These are 
minimum growth targets with which each insurance carrier must comply. 
In year 1 the growth rate is based on 5 percent of Federal enrollees--
.059,000,000=450,000--and 450,000 small business workers would be 
enrolled. This increases to 20 percent in year 2 (1.8 million), 40 
percent in year 3 (3.6 million), 60 percent in year 4 (5.4 million).
  In order to establish stability in FEHBP plans at the beginning of 
the buy-in, larger employers are phased-in first. The phase-in begins 
with the larger small businesses--i.e. with employees of 75 to 100. The 
business would apply to the regional health care plan of choice with 
the commitment that at least 80 percent of their workers would enroll 
in the plan. The business would also assume the administrative 
responsibility for premium collection and payments directly to the 
carrier. In the second year, smaller firms would be able to buy-in--in 
the second year, 50 to 75, and in year three 50 to 1. Thus, any size 
small business would be eligible to enroll in the reformed FEHBP by the 
third year of implementation.

  To assure the integration of working uninsured in the plans and not 
just those currently insured, in the years when the FEHBP participating 
health carriers open-up for small business, any business--as long as it 
meets the size requirement as mentioned in the previous section--may 
apply to join the plan. If more businesses apply than capacity permits 
enrollment during the phase-in years, businesses will be randomly 
selected to participate by each carrier. To assure that previously 
uninsured groups have equitable access to enrolling in the plan, at 
least 50 percent of the randomly accepted group would have to have been 
previously uninsured. This blend would be maintained throughout the 
phase-in. All carriers will be subject to audits by OPM to ensure 
compliance with the buy-in.
  In addition to having access to the same benefit package and the same 
premium rates as Federal enrollees, the small business enrollees who 
have participated in the program for at least 3 years are eligible for 
the portability benefit.
  To assure the continued fiscal integrity of the plan, all carriers 
will be required to have a reinsurance plan for protection from 
unforeseen outlier expenditures.


 ii. open-up FEhbp in a reformed market--enact insurance market reforms

  Enact legislation similar to what passed the Senate during the 102d 
Congress to reform insurance market practices for groups of 1 to 100 
that would level the playing field between FEHBP plans and other 
insurance carriers not participating in FEHBP. This component of the 
proposal would address the inequities in the health care market outside 
the reformed FEHBP, and avoid adverse risk selection. These small group 
insurance market reforms would also establish grants to States to 
establish purchasing cooperatives which would foster additional access 
to health coverage. This proposal would require that any insurer 
offering coverage to businesses of 1 to 100 employees would have to 
offer a ``standard'' or ``basic'' plan; the insurer could not exclude 
specific groups from coverage based on health status--pre-existing 
conditions--or exclude those illnesses; and the insurer could not drop 
a group from coverage--guarantee renewability. In addition, there is a 
portability provision to guarantee seamless health care coverage. As I 
mentioned earlier, these are the same types of reform that passed the 
Senate during the 102d Congress.


    iii. increase equity for self-employed individuals--permanently 
    establish 100 percent deductibility of health insurance premiums

  To eliminate the current bias against self-employed individuals, 
starting on January 1, 1995, self-employed individuals would be allowed 
to fully deduct their health insurance premiums. Self-employed 
workers--unincorporated sole proprietorships of partnerships, may 
currently deduct the full cost of contributions to health plans for 
their employees but only 25 percent of the cost of coverage for 
themselves and their families--would get the 100 percent deduction.


  iv. subsidy for low-wage workers--assure families can afford health 
                             care coverage

  The Secretary of Health and Human Services is instructed to gradually 
eliminate Medicare and Medicaid disproportionate share payments [DISH] 
to meet the appropriate subsidy for low wage workers enrolling in the 
extended FEHBP. This must also cover the cost of the 1000 percent 
deductibility for self-employed individuals, and must be achieved in a 
budget neutral manner.
  I am well aware that my proposal does not address every aspect of our 
health care system. That, again, is not my intent. But, it is evident 
that these four measures would achieve a great deal in moving us 
forward in reforming the Nation's health care system. Let me point out 
that I think that my proposal, in particular the section of the bill 
that extends the FEHBP for buy-in, would work very well with 
legislation established purchasing cooperatives. FedCare would 
essentially transform FEHBP into a purchasing cooperative without 
creating a new bureaucracy.
  Clearly, FedCare would move the nation forward in resolving some of 
the most critical problems of our health care system: access and 
affordability. FedCare doesn't issue a mandate. It provides an 
opportunity. If doesn't build vast new bureaucracies. It uses existing 
programs. It's not based on untested theories. It's based on a proven 
system. FedCare builds on FEHBP--a system that works. FedCare addresses 
the issues that Americans consider most important in health care 
reform: access and affordability, portability, and the elimination of 
not insuring those with pre-existing conditions.
  I have informally discussed and consulted with a number of academics 
and policy experts in the health care field regarding my idea. I hope 
that concerned groups and individuals will view this draft of my 
legislation as a step in the right direction. I look forward to 
receiving comments, suggestions, and recommendations.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1978

       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 ``Federal Health Care 
     Expansion Act of 1994''.

     SEC. 2. FINDINGS.

       The Congress finds that--
       (1) the United States spends more on health care than any 
     other nation in the world, and costs continue to increase at 
     double digit rates;
       (2) more than 35,000,000 people in the United States do not 
     have basic health care insurance;
       (3) small businesses and the self-employed find it 
     particularly difficult to obtain affordable health insurance 
     because of the small-risk pools in which they are grouped; 
     and
       (4) the Federal Employees Health Benefits Program provides 
     quality health care coverage nationwide while providing 
     enrollees with a large degree of choice.

     SEC. 3. PURPOSES.

       The purposes of this Act are to--
       (1) reduce the rising cost of health care through the use 
     of market forces;
       (2) increase access to affordable health care to millions 
     of individuals who do not have health insurance;
       (3) make available to millions of Americans the health care 
     coverage that is available to the President, Members of 
     Congress, Supreme Court Justices, members of the President's 
     Cabinet, and millions of Federal employees and retirees;
       (4) accomplish these purposes without the use of global 
     spending caps, employer mandates, or the establishment of a 
     huge Government bureaucracy; and
       (5) strengthen the Federal Employees Health Benefits 
     Program by introducing greater competition into the Federal 
     employee plan so that the Government can use its power as a 
     major purchaser of health care to drive down the costs of 
     care for Federal enrollees while maintaining high quality 
     care and service.
   TITLE I--SMALL BUSINESS PARTICIPATION IN FEDERAL EMPLOYEES HEALTH 
                             BENEFITS PLANS

     SEC. 101. SMALL BUSINESS PARTICIPATION IN FEDERAL EMPLOYEES 
                   HEALTH BENEFITS PLANS.

       Part III of title 5, United States Code, is amended by 
     inserting after chapter 89 the following new chapter:

 ``CHAPTER 90--SMALL BUSINESS PARTICIPATION IN FEDERAL EMPLOYEE HEALTH 
                             BENEFITS PLANS

``Sec.
``9001. Definition.
``9002. Application to small business participants.
``9003. Small business participation.
``9004. Contributions.
``9005. Continued coverage.
``9006. Schedule of small business participation.

     ``Sec. 9001. Definition

       ``For purposes of this chapter, the term `small business' 
     means any business entity which employs 100 or less employees 
     (including businesses with one self-employed individual).

     ``Sec. 9002. Application to small business participants

       ``(a) The Office of Personnel Management shall promulgate 
     regulations to apply the provisions of chapter 89, relating 
     to health benefits plans, to the greatest extent practicable 
     to small businesses and individuals covered under the 
     provisions of this chapter.
       ``(b) Notwithstanding the provisions of subsection (a), 
     carriers shall offer the same health benefits plans for the 
     same premiums as are offered under chapter 89.
       ``(c) Notwithstanding subsection (a), the provisions of 
     section 8907 shall not apply to individuals covered under 
     this chapter, except the Office of Personnel Management shall 
     establish a method to disseminate information relating to 
     health benefits plans (including information concerning 
     periods of open enrollment and a summary of the information 
     described in section 8908) to such individuals through small 
     business participants and carriers.

     ``Sec. 9003. Small business participation

       ``Any small business which desires to participate in a 
     health benefits plan under this chapter may enter into a 
     contract with a carrier in accordance with this chapter. Such 
     contract shall be for a term of no less than 1 year.

     ``Sec. 9004. Contributions

       ``(a) Subject to the provisions of subsection (b), an 
     individual enrolled in a health benefits plan under this 
     chapter shall make contributions equal to the amount of 
     contributions made by--
       ``(1) a Federal enrollee in such plan under individual, or 
     self and family coverage, as the case may be, as determined 
     under section 8906; and
       ``(2) the Federal agency making Government contributions 
     determined under section 8906 for such Federal enrollee.
       ``(b)(1) A small business may by contract agree to make any 
     amount of the contribution required under subsection (a) on 
     behalf of an enrollee under such subsection.
       ``(2) An agency of a State government may provide any 
     amount of the contribution required under subsection (a) on 
     behalf of an enrollee under such subsection.
       ``(3) The Secretary of Health and Human Services (HHS) may 
     subsidize any amount of the contribution required by 
     subsection (a) or section 9005(a) for any qualified enrollee 
     of any small business participating in a health benefits plan 
     under this chapter. For purposes of the preceding sentence, 
     the term `qualified enrollee' will be determined by the 
     Secretary of HHS according to the number of individuals 
     applying and the budget neutrality requirement in section 105 
     of this Act.
       ``(c) A small business participating under this chapter 
     shall--
       ``(1) collect contributions from employees by withholdings 
     from pay or by another method or schedule;
       ``(2) make payments of such contributions to the contracted 
     carrier;
       ``(3) maintain and make available such records as the 
     Office, applicable State insurance authority, or carrier may 
     require; and
       ``(4) provide any other related administrative service in 
     carrying out the provisions of this chapter.

     ``Sec. 9005. Continued coverage

       ``(a) Subject to subsection (b), the provisions of section 
     8905a shall be made applicable to enrollees and individuals 
     covered by such enrollments under this chapter through 
     section 9002 and the carrier contract entered into under 
     section 9003, except the enrollee shall pay all contributions 
     for continued coverage and the applicable amount for 
     administrative expenses unless the applicable small business 
     by contract agrees to pay any part of such contributions or 
     expenses.
       ``(b) An individual may be covered under continued coverage 
     as provided under subsection (a), only if such individual 
     remains in the same plan during the period of continued 
     coverage as such individual was enrolled in immediately 
     before such period of continued coverage.

     ``Sec. 9006. Schedule of small business participation

       ``(a) Subject to the provisions of subsections (b), (c), 
     (d), (e), and (f), each carrier enrolling individuals of 
     small business participants under this chapter shall ensure 
     that--
       ``(1) in the first contract year after the date of the 
     enactment of the Federal Health Care Expansion Act of 1994, 
     the number of enrollees from small businesses as provided 
     under this chapter shall be no less than 5 percent of the 
     number of Federal enrollees enrolled under chapter 89;
       ``(2) in the second such year, the number of small business 
     enrollees shall be no less than 20 percent of the number of 
     such Federal enrollees;
       ``(3) in the third such year, the number of small business 
     enrollees shall be no less than 40 percent of the number of 
     such Federal enrollees;
       ``(4) in the fourth such year, the number of small business 
     enrollees shall be no less than 60 percent of the number of 
     such Federal enrollees; and
       ``(5) in the fifth such year and in each year thereafter, 
     the number of small business enrollees shall be no less than 
     80 percent of the number of such Federal enrollees.
       ``(b) Beginning in the contract year described under 
     subsection (a)(1) and in each contract year thereafter, in no 
     event shall a carrier enroll enrollees from less than 1 small 
     business.
       ``(c)(1) In the contract year described under subsection 
     (a)(1), a small business may participate if such business--
       ``(A) has between 75 and 100 employees; and
       ``(B) shall ensure that at least 80 percent of such 
     employees shall enroll.
       ``(2) In the contract year described under subsection 
     (a)(2) small businesses with between 50 and 74 employees may 
     additionally participate.
       ``(3) In the contract year described under subsection 
     (a)(3), small businesses with between 1 and 49 employees may 
     additionally participate.
       ``(4) In the contract year described under subsection 
     (a)(4) and each year thereafter, all small businesses may 
     participate.
       ``(d) If during any contract year described under 
     subsection (a) (1) through (5), more small businesses apply 
     for participation than are required to participate under such 
     subsection, the carrier shall--
       ``(1) subject to paragraph (2), randomly select small 
     businesses for participation from all applications; and
       ``(2) ensure that from such randomly selected small 
     businesses, at least 50 percent of such businesses are not 
     offering any type of health insurance benefits to its 
     employees.
       ``(e) In the administration of subsection (a) (2) through 
     (5) each carrier enrolling individuals of small business 
     participants shall ensure that no less than 50 percent of 
     small business enrollees in each contract year shall be 
     individuals who had no health insurance coverage in the 
     previous year.
       ``(f) A small business may participate in a health benefits 
     plan as provided under this section if such business meets 
     all such requirements otherwise provided under this chapter.
       ``(g) The Office may waive the requirements under 
     subsection (a) but only after making a determination that 
     there is insufficient interest in small businesses within the 
     region in participating under this chapter.''.

     SEC. 102. EXTENSION OF CONTINUED COVERAGE.

       Section 8905a of title 5, United States Code, is amended--
       (1) in subsection (e)--
       (A) in paragraph (1)(A) by striking out ``18 months'' and 
     inserting in lieu thereof ``36 months''; and
       (B) in paragraph (2)(C) by striking out ``18-month period'' 
     and inserting in lieu thereof ``36-month period''; and
       (2) in subsection (f)(3)(B) by striking out ``18-month 
     period'' and inserting in lieu thereof ``36-month period.

     SEC. 103. COST EXPERIENCE COMPARISON REPORT.

       No later than January 30 following the first contract year 
     implementing the amendments made by section 101 of this Act, 
     and on January 30 of each 4 years thereafter, each carrier 
     contracting under chapter 89 or 90 of title 5, United States 
     Code, shall submit a report to the Office of Personnel 
     Management that compares the aggregate cost experiences with 
     respect to coverage between--
       (1) Federal employees and other individuals covered under 
     chapter 89 of title 5, United States Code; and
       (2) individuals covered under chapter 90 of such title.

     SEC. 104. RISK ADJUSTMENT STUDY.

       No later than 2 years after the date of the enactment of 
     this Act, the Office of Personnel Management shall conduct a 
     study and submit a health benefits plan risk adjustment 
     report to the Congress. Such report shall examine in the 
     administration of chapters 89 and 90 of title 5, United 
     States Code (as amended and added by this Act)--
       (1) the feasibility of risk adjusting premiums, by the use 
     of subsidies and surcharges to hold carriers harmless for 
     enrollment risks, based on demographic variables;
       (2) the risk adjustment factors that are correlated with 
     increased or diminished risk for consumption of the type of 
     health services included in the standardized level of 
     benefits established under such chapters;
       (3) a formula for assigning numerical risk factors for 
     lower than average risk for consumption of services, the 
     average risk for consumption of services, and higher than 
     average risk factors, and a methodology for the adjustment of 
     such factors; and
       (4) any recommendations for the enactment of legislation.

     SEC. 105. ELIMINATION OF MEDICARE AND MEDICAID 
                   DISPROPORTIONATE SHARE HOSPITAL PAYMENTS TO 
                   FINANCE SELF-EMPLOYED DEDUCTION AND BUY-IN 
                   SUBSIDY.

       (a) Phase-Out of Disproportionate Share Hospital 
     Payments.--The Secretary of Health and Human Services shall 
     phase-out over a 5-fiscal-year period beginning with the 
     first fiscal year following the second January 1 described in 
     section 107, the disproportionate share hospital payments 
     under sections 1886(d)(5)(F) and 1902(a)(13)(A) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(5)(F) and 1396a(a)(13)(A)).
       (b) Budget Neutral Manner.--The phase-out described in 
     subsection (a) shall be accomplished in a Federal budget 
     neutral manner such that the savings for each fiscal year 
     resulting from such phase-out are fully used to offset the 
     additional costs resulting from the amendments made by 
     section 301 and section 201 of this Act and such costs 
     resulting from the premium subsidy program for low-income 
     workers of participating small businesses described in 
     section 9003(b)(3) of title 5, United States Code (as added 
     by section 101 of this Act).
       (c) Conforming Amendments.--
       (1) Clause (i) of section 1886(d)(5)(F) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(5)(F)) is amended by 
     striking ``For discharges'' and inserting ``Except as 
     provided in section 105 of the Federal Health Care Expansion 
     Act of 1994, for discharges''.
       (2) Subparagraph (A) of section 1902(a)(13) of the Social 
     Security Act (42 U.S.C. 1396a(a)(13)) is amended by striking 
     ``take into account the situation of hospitals'' and 
     inserting ``take into account, except as provided in section 
     105 of the Federal Health Care Expansion Act of 1994, the 
     situation of hospitals''.

     SEC. 106. STUDY REGARDING NONWORKER AND NONCOVERED EMPLOYEE 
                   BUY-INS.

       The Secretary of Health and Human Services shall study by 
     what method nonworkers and employees of employers not covered 
     under chapter 90 of title 5, United States Code (as added by 
     section 101 of this Act), may be incorporated into the buy-in 
     for coverage under the Federal Employees Health Benefits 
     Plan. The Secretary shall report the results of such study 
     and any appropriate legislative recommendations to the 
     Congress not later than 2 years after the date of the 
     enactment of this Act.

     SEC. 107. EFFECTIVE DATE.

       (a) In General.--Except as provided under subsection (b), 
     the provisions of this Act and the amendments made by this 
     Act shall be effective on and after the first January 1, 
     occurring after the date of the enactment of this Act.
       (b) Exception.--The provisions of chapters 89 and 90 of 
     title 5, United States Code, as amended and added by this 
     title, relating to the establishment of or exercise of 
     authority (including the promulgation of regulations) by the 
     Office of Personnel Management, the Secretary of Health and 
     Human Services, the President, or any other applicable 
     Federal officer shall take effect on the date of the 
     enactment of this Act in order to establish health benefits 
     plans and fully implement the provisions and amendments made 
     by this Act no later than the first January 1 occurring after 
     the date of the enactment of this Act.
           TITLE II--BETTER ACCESS TO AFFORDABLE HEALTH CARE
 Subtitle A--Improvements in Health Insurance Affordability for Small 
                               Employers

     SEC. 201. GRANTS TO STATES FOR SMALL EMPLOYER HEALTH 
                   INSURANCE PURCHASING PROGRAMS.

       (a) In General.--The Secretary of Health and Human Services 
     (hereafter in this section referred to as the ``Secretary'') 
     shall make grants to States that submit applications meeting 
     the requirements of this section for the establishment and 
     operation of small employer health insurance purchasing 
     programs.
       (b) Use of Funds.--Grant funds awarded under this section 
     to a State may be used to finance administrative costs 
     associated with developing and operating a group purchasing 
     program for small employers, such as the costs associated 
     with--
       (1) engaging in marketing and outreach efforts to inform 
     small employers about the group purchasing program, which may 
     include the payment of sales commissions;
       (2) negotiating with insurers to provide health insurance 
     through the group purchasing program; or
       (3) providing administrative functions, such as eligibility 
     screening, claims administration, and customer service.
       (c) Application Requirements.--An application submitted by 
     a State to the Secretary must describe--
       (1) whether the program will be operated directly by the 
     State or through one or more State-sponsored private 
     organizations and the details of such operation;
       (2) any participation requirements for small employers;
       (3) the extent of insurance coverage among the eligible 
     population, projections for change in the extent of such 
     coverage, and the price of insurance currently available to 
     these small employers;
       (4) program goals for reducing the price of health 
     insurance for small employers and increasing insurance 
     coverage among employees of small employers and their 
     dependents;
       (5) the approaches proposed for enlisting participation by 
     insurers and small employers, including any plans to use 
     State funds to subsidize the cost of insurance for 
     participating employers; and
       (6) the methods proposed for evaluating the effectiveness 
     of the program in reducing the number of uninsured in the 
     State and on lowering the price of health insurance to small 
     employers in the State.
       (d) Grant Criteria.--In awarding grants, the Secretary 
     shall consider the potential impact of the State's proposal 
     on the cost of health insurance for small employers and on 
     the number of uninsured, and the need for regional variation 
     in the awarding of grants. To the extent the Secretary deems 
     appropriate, grants shall be awarded to fund programs 
     employing a variety of approaches for establishing small 
     employer health insurance group purchasing programs.
       (e) Prohibition on Grants.--No grant funds shall be paid to 
     States that do not meet the requirements of title XXI of the 
     Social Security Act with respect to small employer health 
     insurance plans, or to States with group purchasing programs 
     involving small employer health insurance plans that do not 
     meet the requirements of such title.
       (f) Annual Report by States.--States receiving grants under 
     this section must report to the Secretary annually on the 
     numbers and rates of participation by eligible insurers and 
     small employers, on the estimated impact of the program on 
     reducing the number of uninsured, and on the price of 
     insurance available to small employers in the State.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated for each of fiscal years 1995, 1996, and 
     1997, such sums as may be necessary for the purposes of 
     awarding grants under this section.
       (h) Secretarial Report.--The Secretary shall report to 
     Congress by no later than January 1, 1997, on the number and 
     amount of grants awarded under this section, and include with 
     such report an evaluation of the impact of the grant program 
     on the number of uninsured and price of health insurance to 
     small employers in participating States.
    Subtitle B--Improvements in Health Insurance for Small Employers

 PART I--STANDARDS AND REQUIREMENTS OF SMALL EMPLOYER HEALTH INSURANCE 
                                 REFORM

     SEC. 211. STANDARDS AND REQUIREMENTS OF SMALL EMPLOYER HEALTH 
                   INSURANCE.

       The Social Security Act is amended by adding at the end the 
     following new title:

    ``TITLE XXI--STANDARDS FOR SMALL EMPLOYER HEALTH INSURANCE AND 
                  CERTIFICATION OF MANAGED CARE PLANS

                ``Part A--General Standards; Definitions


 ``APPLICATION OF REQUIREMENTS TO SMALL EMPLOYER HEALTH INSURANCE PLANS

       ``Sec. 2101. (a) Plan Under State Regulatory Program or 
     Certified by the Secretary.--An insurer offering a health 
     insurance plan to a small employer in a State on or after the 
     effective date applicable to the State under subsection (b) 
     shall be treated as meeting the requirements of this title 
     if--
       ``(1) the Secretary determines that the State has 
     established a regulatory program that provides for the 
     application and enforcement of standards meeting the 
     requirements under section 2102 to meet the requirements of 
     part B of this title; and
       ``(2) if the State has not established such a program or if 
     the program has been decertified by the Secretary under 
     section 2102(b), the health insurance plan has been certified 
     by the Secretary (in accordance with such procedures as the 
     Secretary establishes) as meeting the requirements of part B 
     of this title.
       ``(b) Effective Dates.--
       ``(1) In general.--Except as specified in paragraph (2) and 
     provided in paragraph (3), the standards established under 
     section 2102 to meet the requirements of part B of this title 
     shall apply to health insurance plans offered, issued, or 
     renewed to a small employer in a State on or after January 1, 
     1995.
       ``(2) Exception for legislation.--In the case of a State 
     which the Secretary identifies, in consultation with the 
     NAIC, as--
       ``(A) requiring State legislation (other than legislation 
     appropriating funds) in order for insurers and health 
     insurance plans offered to small employers to meet the 
     standards under the program established under subsection (a), 
     or
       ``(B) having a legislature which does not meet in 1995 in a 
     legislative session in which such legislation may be 
     considered,

     the date specified in this paragraph is the first day of the 
     first calendar quarter beginning after the close of the first 
     regular legislative session of the State legislature that 
     begins on or after January 1, 1996. For purposes of the 
     previous sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular legislative session of the 
     State legislature.
       ``(3) Requirements applied to existing policies.--In the 
     case of a health insurance plan in effect before the 
     applicable effective date specified in paragraph (1) or (2), 
     the requirements referred to in subsections (a) and (b) of 
     section 2112 shall not apply to any such plan, or any renewal 
     of such plan, before the date which is 2 years after such 
     effective date.
       ``(c) Reporting Requirements of States.--Each State shall 
     submit to the Secretary, at intervals established by the 
     Secretary, a report on the implementation and enforcement of 
     the standards under the program established under subsection 
     (a)(1) with respect to health insurance plans offered to 
     small employers.
       ``(d) More Stringent State Standards Permitted.--Except as 
     provided in subsections (b)(8) and (c)(4) of section 2113, a 
     State may implement standards that are more stringent than 
     the standards established to meet the requirements of part B 
     of this title.
       ``(e) Limited Waiver of Rating Requirements.--The Secretary 
     may waive requirements with respect to subsections (b) and 
     (e) of section 2112 in the case of a State with equally 
     stringent but not identical standards in effect prior to 
     January 1, 1994.


                      ``ESTABLISHMENT OF STANDARDS

       ``Sec. 2102. (a) Establishment of Standards.--
       ``(1) Role of the naic.--The Secretary shall request that 
     the NAIC--
       ``(A) develop specific standards, in the form of a model 
     Act and model regulations, to implement the requirements of 
     part B of this title; and
       ``(B) report to the Secretary on such standards,

     by not later than September 30, 1994. If the NAIC develops 
     such standards within such period and the Secretary finds 
     that such standards implement the requirements of part B of 
     this title, such standards shall be the standards applied 
     under section 2101.
       ``(2) Role of the secretary.--If the NAIC fails to develop 
     and report on the standards described in paragraph (1) by the 
     date specified in such paragraph or the Secretary finds that 
     such standards do not implement the requirements under part B 
     of this title, the Secretary shall develop and publish such 
     standards, by not later than December 31, 1994. Such 
     standards shall then be the standards applied under section 
     2101.
       ``(3) Standards on guaranteed availability.--The standards 
     developed under paragraphs (1) and (2) shall provide 
     alternative standards for guaranteeing availability of health 
     insurance plans for all small employers in a State as 
     provided in section 2111(c).
       ``(4) Guidelines for demographic rating factors.--The 
     standards developed under paragraphs (1) and (2) shall 
     include guidelines with respect to rating factors used by 
     insurers to adjust premiums to reflect demographic 
     characteristics of a small employer group.
       ``(b) Periodic Secretarial Review of State Regulatory 
     Program.--The Secretary periodically shall review State 
     regulatory programs to determine if they continue to meet and 
     enforce the standards referred to in subsection (a). If the 
     Secretary initially determines that a State regulatory 
     program no longer meets and enforces such standards, the 
     Secretary shall provide the State an opportunity to adopt a 
     plan of correction that would bring such program into 
     compliance with such standards. If the Secretary makes a 
     final determination that the State regulatory program fails 
     to meet and enforce such standards and requirements after 
     such an opportunity, the Secretary shall decertify such 
     program and assume responsibility under section 2101(a)(2) 
     with respect to plans in the State.
       ``(c) GAO Audits.--The Comptroller General of the United 
     States shall conduct periodic reviews on a sample of State 
     regulatory programs to determine their compliance with the 
     standards and requirements of this title. The Comptroller 
     General of the United States shall report to the Secretary 
     and Congress on the findings of such reviews.


                             ``DEFINITIONS

       ``Sec. 2103. (a) Health Insurance Plan.--As used in this 
     title, the term `health insurance plan' means any hospital or 
     medical service policy or certificate, hospital or medical 
     service plan contract, health maintenance organization group 
     contract, or a multiple employer welfare arrangement, but 
     does not include--
       ``(1) a self-insured group health plan;
       ``(2) a self-insured multiemployer group health plan; or
       ``(3) any of the following offered by an insurer--
       ``(A) accident only, dental only, vision only, disability 
     only insurance, or long-term care only insurance,
       ``(B) coverage issued as a supplement to liability 
     insurance,
       ``(C) medicare supplemental insurance as defined in section 
     1882(g)(1),
       ``(D) workmen's compensation or similar insurance, or
       ``(E) automobile medical-payment insurance.

     In the case of a multiple employer welfare arrangement that 
     is fully insured, the requirements of this Act shall only 
     apply to the insurer of the arrangement.
       ``(b) Insurer.--As used in this title the term `insurer' 
     means any person that offers a health insurance plan to a 
     small employer.
       ``(c) General Definitions.--As used in this title:
       ``(1) Applicable regulatory authority.--The term 
     `applicable regulatory authority' means--
       ``(A) in the case of a health insurance plan offered in a 
     State with a program meeting the requirements of part B of 
     this title, the State commissioner or superintendent of 
     insurance or other State authority responsible for regulation 
     of health insurance; or
       ``(B) in the case of a health insurance plan certified by 
     the Secretary under section 2101(a)(2), the Secretary.
       ``(2) Small employer.--The term `small employer' means, 
     with respect to a calendar year, an employer that normally 
     employs more than 1 but less than 101 eligible employees on a 
     typical business day. For the purposes of this paragraph, the 
     term `employee' includes a self-employed individual.
       ``(3) Eligible employee.--The term `eligible employee' 
     means, with respect to an employer, an employee who normally 
     performs on a monthly basis at least 30 hours of service per 
     week for that employer.
       ``(4) NAIC.--The term `NAIC' means the National Association 
     of Insurance Commissioners.
       ``(5) State.--The term `State' means each of the several 
     States, the District of Columbia, and the Commonwealth of 
     Puerto Rico.

            ``Part B--Small Employer Health Insurance Reform


  ``GENERAL REQUIREMENTS FOR HEALTH INSUR- ANCE PLANS ISSUED TO SMALL 
                               EMPLOYERS

       ``Sec. 2111. (a) Registration With Applicable Regulatory 
     Authority.--Each insurer shall register with the applicable 
     regulatory authority for each State in which it issues or 
     offers a health insurance plan to small employers.
       ``(b) Guaranteed Eligibility.--
       ``(1) In general.--No insurer may exclude from coverage any 
     eligible employee, or the spouse or any dependent child of 
     the eligible employee, to whom coverage is made available by 
     a small employer.
       ``(2) Waiting periods.--Paragraph (1) shall not apply to 
     any period an eligible employee is excluded from coverage 
     under the health insurance plan solely by reason of a 
     requirement imposed by an employer applicable to all 
     employees that a minimum period of service with the small 
     employer is required before the employee is eligible for such 
     coverage.
       ``(c) Guaranteed Availability.--
       ``(1) In general.--Subject to the succeeding provisions of 
     this subsection, an insurer that offers a health insurance 
     plan to small employers located in a State must meet the 
     standards adopted by the State described in paragraph (2).
       ``(2) Standards on guaranteed availability.--
       ``(A) In general.--In order to implement the requirements 
     of this title, the standards developed under paragraphs (1) 
     and (2) of section 2102(a) shall--
       ``(i) require that a State adopt a mechanism for 
     guaranteeing the availability of health insurance plans for 
     all small employers in the State,
       ``(ii) specify alternative mechanisms, including at least 
     the alternative mechanisms described in subparagraph (B), 
     that a State may adopt, and
       ``(iii) prohibit marketing or other practices by an insurer 
     intended to discourage or limit the issuance of a health 
     insurance plan to a small employer on the basis of size, 
     industry, geographic area, expected need for health services, 
     or other risk factors.
       ``(B) Alternative mechanisms.--The alternative mechanisms 
     described in this subparagraph are:
       ``(i) A mechanism under which the State--

       ``(I) requires that any insurer offering a health insurance 
     plan to a small employer in the State shall offer the same 
     plan to all other small employers in the State or in the 
     portion of the State established as the insurer's geographic 
     service area (as approved by the State), and
       ``(II) requires the participation of all such insurers in a 
     small employer reinsurance program established by the State.

       ``(ii) A mechanism under which the State--

       ``(I) requires that any insurer offering a health insurance 
     plan to a small employer in the State shall offer the same 
     plan to all other small employers in the State or in the 
     portion of the State established as the insurer's geographic 
     service area (as approved by the State), and
       ``(II) permits any such insurer to participate in a small 
     employer reinsurance program established by the State.

       ``(iii) A mechanism under which the State requires that any 
     insurer offering a health insurance plan to a small employer 
     in the State shall participate in a program for assigning 
     high-risk groups among all such insurers.
       ``(iv) A mechanism under which the State requires that any 
     insurer that--

       ``(I) offers a health insurance plan to a small employer in 
     the State, and
       ``(II) does not agree to offer the same plan to all other 
     small employers in the State or in the portion of the State 
     established as the insurer's geographic service area (as 
     approved by the State),

     shall participate in a program for assigning high-risk groups 
     among all such insurers.
       ``(C) State adoption of certain standards.--A regulatory 
     program adopted by the State under section 2101 must 
     provide--
       ``(i) for the adoption of one of the mechanisms described 
     in clauses (i) through (iv) of subparagraph (B), or
       ``(ii) for such other program that guarantees availability 
     of health insurance to all small employers in the State and 
     is approved by the Secretary.
       ``(D) Standards for noncomplying states.--The Secretary, in 
     consultation with the Secretary of the Treasury, shall 
     develop requirements with respect to guaranteed availability 
     to apply with respect to insurers located in a State that has 
     not adopted the standards under section 2102 and who wish to 
     apply for certification under section 2101(a)(2).
       ``(3) Grounds for refusal to renew.--
       ``(A) In general.--An insurer may refuse to renew, or 
     (except with respect to clause (iii)) may terminate, a health 
     insurance plan under this part only for--
       ``(i) nonpayment of premiums,
       ``(ii) fraud or misrepresentation,
       ``(iii) failure to maintain minimum participation rates 
     (consistent with subparagraph (B)), or
       ``(iv) repeated misuse of a provider network provision.
       ``(B) Minimum participation rates.--An insurer may require, 
     with respect to a health insurance plan issued to a small 
     employer, that a minimum percentage of eligible employees who 
     do not otherwise have health insurance are enrolled in such 
     plan if such percentage is applied uniformly to all plans 
     offered to employers of comparable size.
       ``(d) Guaranteed Renewability.--
       ``(1) In general.--An insurer shall ensure that a health 
     insurance plan issued to a small employer be renewed, at the 
     option of the small employer, unless the plan is terminated 
     for a reason specified in paragraph (2) or in subsection 
     (c)(3)(A).
       ``(2) Termination of small employer business.--An insurer 
     is not required to renew a health insurance plan with respect 
     to a small employer if the insurer--
       ``(A) elects not to renew all of its health insurance plans 
     issued to small employers in a State; and
       ``(B) provides notice to the applicable regulatory 
     authority in the State and to each small employer covered 
     under a plan of such termination at least 180 days before the 
     date of expiration of the plan.

     In the case of such a termination, the insurer may not 
     provide for issuance of any health insurance plan to a small 
     employer in the State during the 5-year period beginning on 
     the date of termination of the last plan not so renewed.
       ``(e) No Discrimination Based on Health Status for Certain 
     Services.--
       ``(1) In general.--Except as provided under paragraph (2), 
     a health insurance plan offered to a small employer by an 
     insurer may not deny, limit, or condition the coverage under 
     (or benefits of) the plan based on the health status, claims 
     experience, receipt of health care, medical history, or lack 
     of evidence of insurability, of an individual.
       ``(2) Treatment of preexisting condition exclusions for all 
     services.--
       ``(A) In general.--Subject to the succeeding provisions of 
     this paragraph, a health insurance plan offered to a small 
     employer by an insurer may exclude coverage with respect to 
     services related to treatment of a preexisting condition, but 
     the period of such exclusion may not exceed 6 months. The 
     exclusion of coverage shall not apply to services furnished 
     to newborns.
       ``(B)  Crediting of previous coverage.--
       ``(i) In general.--A health insurance plan issued to a 
     small employer by an insurer shall provide that if an 
     individual under such plan is in a period of continuous 
     coverage (as defined in clause (ii)(I)) with respect to 
     particular services as of the date of initial coverage under 
     such plan, any period of exclusion of coverage with respect 
     to a preexisting condition for such services or type of 
     services shall be reduced by 1 month for each month in the 
     period of continuous coverage.
       ``(ii) Definitions.--As used in this subparagraph:

       ``(I) Period of continuous coverage.--The term `period of 
     continuous coverage' means, with respect to particular 
     services, the period beginning on the date an individual is 
     enrolled under a health insurance plan, title XVIII, title 
     XIX, or other health benefit arrangement including a self-
     insured plan which provides benefits with respect to such 
     services and ends on the date the individual is not so 
     enrolled for a continuous period of more than 3 months.
       ``(II) Preexisting condition.--The term `preexisting 
     condition' means, with respect to coverage under a health 
     insurance plan issued to a small employer by an insurer, a 
     condition which has been diagnosed or treated during the 3-
     month period ending on the day before the first date of such 
     coverage (without regard to any waiting period).


       ``REQUIREMENTS RELATED TO RESTRICTIONS ON RATING PRACTICES

       ``Sec. 2112. (a) Limit on Variation of Premiums Between 
     Blocks of Business.--
       ``(1) In general.--The base premium rate for any block of 
     business of an insurer (as defined in section 2103(b)(1)) may 
     not exceed the base premium rate for any other block of 
     business by more than 20 percent.
       ``(2) Exceptions.--Paragraph (1) shall not apply to a block 
     of business if the applicable regulatory authority determines 
     that--
       ``(A) the block is one for which the insurer does not 
     reject, and never has rejected, small employers included 
     within the definition of employers eligible for the block of 
     business or otherwise eligible employees and dependents who 
     enroll on a timely basis, based upon their claims experience, 
     health status, industry, or occupation,
       ``(B) the insurer does not transfer, and never has 
     transferred, a health insurance plan involuntarily into or 
     out of the block of business, and
       ``(C) health insurance plans offered under the block of 
     business are currently available for purchase by small 
     employers at the time an exception to paragraph (1) is sought 
     by the insurer.
       ``(b) Limit on Variation in Premium Rates Within a Block of 
     Business.--For a block of business of an insurer, the highest 
     premium rates charged during a rating period to small 
     employers with similar demographic characteristics (limited 
     to age, sex, family size, and geography and not relating to 
     claims experience, health status, industry, occupation, or 
     duration of coverage since issue) for the same or similar 
     coverage, or the highest rates which could be charged to such 
     employers under the rating system for that block of business, 
     shall not exceed an amount that is 1.5 times the base premium 
     rate for the block of business for a rating period (or 
     portion thereof) that occurs in the first 3 years in which 
     this section is in effect, and 1.35 times the base premium 
     rate thereafter.
       ``(c) Consistent Application of Rating Factors.--In 
     establishing premium rates for health insurance plans offered 
     to small employers--
       ``(1) an insurer making adjustments with respect to age, 
     sex, family size, or geography must apply such adjustments 
     consistently across small employers (as provided in 
     guidelines developed under section 2102(a)(4)), and
       ``(2) no insurer may use a geographic area that is smaller 
     than a county or smaller than an area that includes all areas 
     in which the first three digits of the zip code are 
     identical, whichever is smaller.
       ``(d) Limit on Transfer of Employers Among Blocks of 
     Business.--
       ``(1) In general.--An insurer may not transfer a small 
     employer from one block of business to another without the 
     consent of the employer.
       ``(2) Offers to transfer.--An insurer may not offer to 
     transfer a small employer from one block of business to 
     another unless--
       ``(A) the offer is made without regard to age, sex, 
     geography, claims experience, health status, industry, 
     occupation or the date on which the policy was issued, and
       ``(B) the same offer is made to all other small employers 
     in the same block of business.
       ``(e) Limits on Variation in Premium Increases.--The 
     percentage increase in the premium rate charged to a small 
     employer for a new rating period (determined on an annual 
     basis) may not exceed the sum of the percentage change in the 
     base premium rate plus 5 percentage points.
       ``(f) Definitions.--In this section:
       ``(1) Base premium rate.--The term `base premium rate' 
     means, for each block of business for each rating period, the 
     lowest premium rate which could have been charged under a 
     rating system for that block of business by the insurer to 
     small employers with similar demographic or other relevant 
     characteristics (limited to age, sex, family size, and 
     geography and not relating to claims experience, health 
     status, industry, occupation or duration of coverage since 
     issue) for health insurance plans with the same or similar 
     coverage.
       ``(2) Block of business.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `block of business' means, with respect to an 
     insurer, all of the small employers with a health insurance 
     plan issued by the insurer (as shown on the records of the 
     insurer).
       ``(B) Distinct groups.--
       ``(i) In general.--Subject to clause (ii), a distinct group 
     of small employers with health insurance plans issued by an 
     insurer may be treated as a block of business by such insurer 
     if all of the plans in such group--

       ``(I) are marketed and sold through individuals and 
     organizations that do not participate in the marketing or 
     sale of other distinct groups by the insurer,
       ``(II) have been acquired from another insurer as a 
     distinct group, or
       ``(III) are provided through an association with membership 
     of not less than 25 small employers that has been formed for 
     purposes other than obtaining health insurance.

       ``(ii) Limitation.--An insurer may not establish more than 
     six distinct groups of small employers.
       ``(f) Full Disclosure of Rating Practices.--
       ``(1) In general.--At the time an insurer offers a health 
     insurance plan to a small employer, the insurer shall fully 
     disclose to the employer all of the following:
       ``(A) Rating practices for small employer health insurance 
     plans, including rating practices for different populations 
     and benefit designs.
       ``(B) The extent to which premium rates for the small 
     employer are established or adjusted based upon the actual or 
     expected variation in claims costs or health condition of the 
     employees of such small employer and their dependents.
       ``(C) The provisions concerning the insurer's right to 
     change premium rates, the extent to which premiums can be 
     modified, and the factors which affect changes in premium 
     rates.
       ``(2) Notice on expiration.--An insurer providing health 
     insurance plans to small employers shall provide for notice, 
     at least 60 days before the date of expiration of the health 
     insurance plan, of the terms for renewal of the plan. Such 
     notice shall include an explanation of the extent to which 
     any increase in premiums is due to actual or expected claims 
     experience of the individuals covered under the small 
     employer's health insurance plan contract.
       ``(g) Actuarial Certification.--Each insurer shall file 
     annually with the applicable regulatory authority a written 
     statement by a member of the American Academy of Actuaries 
     (or other individual acceptable to such authority) certifying 
     that, based upon an examination by the individual which 
     includes a review of the appropriate records and of the 
     actuarial assumptions of the insurer and methods used by the 
     insurer in establishing premium rates for small employer 
     health insurance plans--
       ``(1) the insurer is in compliance with the applicable 
     provisions of this section, and
       ``(2) the rating methods are actuarially sound.

     Each insurer shall retain a copy of such statement for 
     examination at its principal place of business.


  ``REQUIREMENTS FOR SMALL EMPLOYER HEALTH INSURANCE BENEFIT PACKAGE 
                               OFFERINGS

       ``Sec. 2113. (a) Basic and Standard Benefit Packages.--
       ``(1) In general.--If an insurer offers any health 
     insurance plan to small employers in a State, the insurer 
     shall also offer a health insurance plan providing for the 
     standard benefit package defined in subsection (b) and a 
     health insurance plan providing for the basic benefit package 
     defined in subsection (c).
       ``(2) Managed care option.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     if an insurer offers any health insurance plan to small 
     employers in a State and also offers a managed care plan in 
     the State or a geographic area within the State to employers 
     that are not small employers, the insurer must offer a 
     similar managed care plan to small employers in the State or 
     geographic area.
       ``(B) Size limits.--An insurer may cease enrolling new 
     small employer groups in all or a portion of the insurer's 
     service area for a managed care plan if it ceases to enroll 
     any new employer groups within the service area or within a 
     portion of a service area of such plan.
       ``(b) Standard Benefit Package.--
       ``(1) In general.--
       ``(A) Package defined.--Except as otherwise provided in 
     this section, a health insurance plan providing for a 
     standard benefit package shall be limited to payment for--
       ``(i) inpatient and outpatient hospital care, except that 
     treatment for a mental disorder, as defined in subparagraph 
     (B)(i), is subject to the special limitations described in 
     clause (v)(I);
       ``(ii) inpatient and outpatient physician services, as 
     defined in subparagraph (B)(ii), except that psychotherapy or 
     counseling for a mental disorder is subject to the special 
     limitations described in clause (v)(II);
       ``(iii) diagnostic tests;
       ``(iv) preventive services limited to--

       ``(I) prenatal care and well-baby care provided to children 
     who are 1 year of age or younger;
       ``(II) well-child care;
       ``(III) Pap smears;
       ``(IV) mammograms; and
       ``(V) colorectal screening services; and

       ``(v)(I) inpatient hospital care for a mental disorder for 
     not less than 45 days per year, except that days of partial 
     hospitalization or residential care may be substituted for 
     days of inpatient care; and
       ``(II) outpatient psychotherapy and counseling for a mental 
     disorder for not less than 20 visits per year provided by a 
     provider who is acting within the scope of State law and 
     who--

       ``(aa) is a physician; or
       ``(bb) is a duly licensed or certified clinical 
     psychologist or a duly licensed or certified clinical social 
     worker, a duly licensed or certified equivalent mental health 
     professional, or a clinic or center providing duly licensed 
     or certified mental health services.

       ``(B) Definitions.--For purposes of this paragraph:
       ``(i) Mental disorder.--The term `mental disorder' has the 
     same meaning given such term in the International 
     Classification of Diseases, 9th Revision, Clinical 
     Modification.
       ``(ii) Physician services.--The term `physician services' 
     means professional medical services lawfully provided by a 
     physician under State medical practice acts, and includes 
     professional services provided by a dentist, licensed 
     advanced-practice nurse, physician assistant, optometrist, 
     podiatrist, or chiropractor acting within the scope of their 
     practices (as determined under State law) if such services 
     would be treated as physician services if furnished by a 
     physician.
       ``(2) Amount, scope, and duration of certain benefits.--
       ``(A) In general.--Except as provided in subparagraph (B) 
     and in paragraph (3), a health insurance plan providing for a 
     standard benefit package shall place no limits on the amount, 
     scope, or duration of benefits described in subparagraphs (A) 
     through (C) of paragraph (1).
       ``(B) Preventive services.--A health insurance plan 
     providing for a standard benefit package may limit the 
     amount, scope, and duration of preventive services described 
     in subparagraph (D) of paragraph (1) provided that the 
     amount, scope, and duration of such services are reasonably 
     consistent with recommendations and periodicity schedules 
     developed by appropriate medical experts.
       ``(3) Exceptions.--Paragraph (1) shall not be construed as 
     requiring a plan to include payment for--
       ``(A) items and services that are not medically necessary;
       ``(B) routine physical examinations or preventive care 
     (other than care and services described in subparagraph (D) 
     of paragraph (1)); or
       ``(C) experimental services and procedures.
       ``(4) Limitation on premiums.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an insurer issuing a health insurance plan providing for a 
     standard benefit package shall not require an employee to pay 
     a monthly premium which exceeds 20 percent of the total 
     monthly premium.
       ``(B) Part-time employee excepted.--In the case of a part-
     time employee, an insurer issuing a health insurance plan 
     providing for a standard benefit package may require that 
     such an employee pay a monthly premium that does not exceed 
     50 percent of the total monthly premium.
       ``(5) Limitation on deductibles.--
       ``(A) In general.--Except as permitted under subparagraph 
     (B), a health insurance plan providing for a standard benefit 
     package shall not provide a deductible amount for benefits 
     provided in any plan year that exceeds--
       ``(i) with respect to benefits payable for items and 
     services furnished to any employee with no family member 
     enrolled under the plan, for a plan year beginning in--

       ``(I) a calendar year prior to 1995, $400; or
       ``(II) for a subsequent calendar year, the limitation 
     specified in this clause for the previous calendar year 
     increased by the percentage increase in the consumer price 
     index for all urban consumers (United States city average, as 
     published by the Bureau of Labor Statistics) for the 12-month 
     period ending on September 30 of the preceding calendar year; 
     and

       ``(ii) with respect to benefits payable for items and 
     services furnished to any employee with a family member 
     enrolled under the standard benefit package plan, for a plan 
     year beginning in--

       ``(I) a calendar year prior to 1995, $400 per family member 
     and $700 per family; or
       ``(II) for a subsequent calendar year, the limitation 
     specified in this clause for the previous calendar year 
     increased by the percentage increase in the consumer price 
     index for all urban consumers (United States city average, as 
     published by the Bureau of Labor Statistics) for the 12-month 
     period ending on September 30 of the preceding calendar year.

     If the limitation computed under clause (i)(II) or (ii)(II) 
     is not a multiple of $10, it shall be rounded to the next 
     highest multiple of $10.
       ``(B) Wage-related deductible.--A health insurance plan may 
     provide for any other deductible amount instead of the 
     limitations under--
       ``(i) subparagraph (A)(i), if such amount does not exceed 
     (on an annualized basis) 1 percent of the total wages paid to 
     the employee in the plan year; or
       ``(ii) subparagraph (A)(ii), if such amount does not exceed 
     (on an annualized basis) 1 percent per family member or 2 
     percent per family of the total wages paid to the employee in 
     the plan year.
       ``(6) Limitation on copayments and coinsurance.--
       ``(A) In general.--Subject to subparagraphs (B) through 
     (D), a health insurance plan providing for a standard health 
     benefit package may not require the payment of any copayment 
     or coinsurance for an item or service for which coverage is 
     required under this section--
       ``(i) in an amount that exceeds 20 percent of the amount 
     payable for the item or service under the plan; or
       ``(ii) after an employee and family covered under the plan 
     have incurred out-of-pocket expenses under the plan that are 
     equal to the out-of-pocket limit (as defined in subparagraph 
     (E)(ii)) for a plan year.
       ``(B) Exception for managed care plans.--A health insurance 
     plan that is a managed care plan may require payments in 
     excess of the amount permitted under subparagraph (A) in the 
     case of items and services furnished by nonparticipating 
     providers.
       ``(C) Exception for improper utilization.--A health 
     insurance plan may provide for copayment or coinsurance in 
     excess of the amount permitted under subparagraph (A) for any 
     item or service that an individual obtains without complying 
     with procedures established by a managed care plan or under a 
     utilization program to ensure the efficient and appropriate 
     utilization of covered services.
       ``(D) Exceptions for mental health care.--In the case of 
     care described in paragraph (1)(E)(ii), a health insurance 
     plan shall not require payment of any copayment or 
     coinsurance for an item or service for which coverage is 
     required by this part in an amount that exceeds 50 percent of 
     the amount payable for the item or service.
       ``(7) Limit on out-of-pocket expenses.--
       ``(A) Out-of-pocket expenses defined.--As used in this 
     section, the term `out-of-pocket expenses' means, with 
     respect to an employee in a plan year, amounts payable under 
     the plan as deductibles and coinsurance with respect to items 
     and services provided under the plan and furnished in the 
     plan year on behalf of the employee and family covered under 
     the plan.
       ``(B) Out-of-pocket limit defined.--As used in this section 
     and except as provided in subparagraph (C), the term `out-of-
     pocket limit' means for a plan year beginning in--
       ``(i) a calendar year prior to 1995, $3,000; or
       ``(ii) for a subsequent calendar year, the limit specified 
     in this subparagraph for the previous calendar year increased 
     by the percentage increase in the consumer price index for 
     all urban consumers (United States city average, as published 
     by the Bureau of Labor Statistics) for the 12-month period 
     ending on September 30 of the preceding calendar year.

     If the limit computed under clause (ii) is not a multiple of 
     $10, it shall be rounded to the next highest multiple of $10.
       ``(C) Alternative out-of-pocket limit.--A health insurance 
     plan may provide for an out-of-pocket limit other than that 
     defined in subparagraph (B) if, for a plan year with respect 
     to an employee and the family of the employee, the limit does 
     not exceed (on an annualized basis) 10 percent of the total 
     wages paid to the employee in the plan year.
       ``(8) Limited preemption of state mandated benefits.--No 
     State law or regulation in effect in a State that requires 
     health insurance plans offered to small employers in the 
     State to include specified items and services other than 
     those specified by this subsection shall apply with respect 
     to a health insurance plan providing for a standard benefit 
     package offered by an insurer to a small employer. A State 
     law or regulation requiring the coverage of newborns, adopted 
     children or other specified categories of dependents shall 
     continue to apply.
       ``(c) Basic Benefits Package.--
       ``(1) In general.--A health insurance plan providing for a 
     basic benefit package shall be limited to payment for--
       ``(A) inpatient and outpatient hospital care, including 
     emergency services;
       ``(B) inpatient and outpatient physicians' services;
       ``(C) diagnostic tests; and
       ``(D) preventive services (which may include one or more of 
     the following services)--
       ``(i) prenatal care and well-baby care provided to children 
     who are 1 year of age or younger;
       ``(ii) well-child care;
       ``(iii) Pap smears;
       ``(iv) mammograms; and
       ``(v) colorectal screening services.

     Nothing in this paragraph shall prohibit a basic health 
     benefit package from including coverage for treatment of a 
     mental disorder.
       ``(2) Cost-sharing.--Each health insurance plan providing 
     for the basic benefit package issued to a small employer by 
     an insurer may impose premiums, deductibles, copayments, or 
     other cost-sharing on enrollees of such plan.
       ``(3) Out-of-pocket limit.--Each health insurance plan 
     providing for a basic benefit package shall provide for a 
     limit on out-of-pocket expenses.
       ``(4) Limited preemption of state mandated benefits.--No 
     State law or regulation in effect in a State that requires 
     health insurance plans offered to small employers in the 
     State to include specified items and services other than 
     those described in this subsection shall apply with respect 
     to a health insurance plan providing for a basic benefit 
     package offered by an insurer to a small employer. A State 
     law or regulation requiring the coverage of newborns, adopted 
     children or other specified categories of dependents shall 
     continue to apply.''.

             PART II--TAX PENALTY ON NONCOMPLYING INSURERS

     SEC. 221. EXCISE TAX ON PREMIUMS RECEIVED ON HEALTH INSURANCE 
                   POLICIES WHICH DO NOT MEET CERTAIN 
                   REQUIREMENTS.

       (a) In General.--Chapter 47 of the Internal Revenue Code of 
     1986 (relating to taxes on group health plans) is amended by 
     adding at the end thereof the following new section:

     ``SEC. 5000A. FAILURE TO SATISFY CERTAIN STANDARDS FOR HEALTH 
                   INSURANCE.

       ``(a) General Rule.--In the case of any person issuing a 
     health insurance plan to a small employer, there is hereby 
     imposed a tax on the failure of such person to meet at any 
     time during any taxable year the applicable requirements of 
     title XXI of the Social Security Act. The Secretary of Health 
     and Human Services shall determine whether any person meets 
     the requirements of such title.
       ``(b) Amount of Tax.--
       ``(1) In general.--The amount of tax imposed by subsection 
     (a) by reason of 1 or more failures during a taxable year 
     shall be equal to 25 percent of the gross premiums received 
     during such taxable year with respect to all health insurance 
     plans issued to a small employer by the person on whom such 
     tax is imposed.
       ``(2) Gross premiums.--For purposes of paragraph (1), gross 
     premiums shall include any consideration received with 
     respect to any accident and health insurance contract.
       ``(3) Controlled groups.--For purposes of paragraph (1)--
       ``(A) Controlled group of corporations.--All corporations 
     which are members of the same controlled group of 
     corporations shall be treated as 1 person. For purposes of 
     the preceding sentence, the term `controlled group of 
     corporations' has the meaning given to such term by section 
     1563(a), except that--
       ``(i) `more than 50 percent' shall be substituted for `at 
     least 80 percent' each place it appears in section 
     1563(a)(1), and
       ``(ii) the determination shall be made without regard to 
     subsections (a)(4) and (e)(3)(C) of section 1563.
       ``(B) Partnerships, proprietorships, etc., which are under 
     common control.--Under regulations prescribed by the 
     Secretary, all trades or business (whether or not 
     incorporated) which are under common control shall be treated 
     as 1 person. The regulations prescribed under this 
     subparagraph shall be based on principles similar to the 
     principles which apply in the case of subparagraph (A).
       ``(c) Limitation on Tax.--
       ``(1) Tax not to apply where failure not discovered 
     exercising reasonable diligence.--No tax shall be imposed by 
     subsection (a) with respect to any failure for which it is 
     established to the satisfaction of the Secretary that the 
     person on whom the tax is imposed did not know, and 
     exercising reasonable diligence would not have known, that 
     such failure existed.
       ``(2) Tax not to apply where failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) with respect 
     to any failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected during the 30-day period 
     beginning on the 1st date any of the persons on whom the tax 
     is imposed knew, or exercising reasonable diligence would 
     have known, that such failure existed.
       ``(3) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive relative to the failure involved.
       ``(d) Definitions.--For purposes of this section:
       ``(1) Health insurance plan.--The term `health insurance 
     plan' means any hospital or medical service policy or 
     certificate, hospital or medical service plan contract, 
     health maintenance organization group contract, or a multiple 
     employer welfare arrangement, but does not include--
       ``(A) a self-insured group health plan;
       ``(B) a self-insured multiemployer group health plan; or
       ``(C) any of the following:
       ``(i) accident only, dental only, vision only, disability 
     only, or long-term care only insurance,
       ``(ii) coverage issued as a supplement to liability 
     insurance,
       ``(iii) medicare supplemental insurance as defined in 
     section 1882(g)(1),
       ``(iv) workmen's compensation or similar insurance, or
       ``(v) automobile medical-payment insurance.

     In the case of a multiple employer welfare arrangement that 
     is fully insured, this Act shall only apply to the insurer of 
     the arrangement.
       ``(2) Small employer.--The term `small employer' means, 
     with respect to a calendar year, an employer that normally 
     employs more than 1 but less than 101 eligible employees on a 
     typical business day. For the purposes of this paragraph, the 
     term `employee' includes a self-employed individual.
       ``(3) Eligible employee.--The term `eligible employee' 
     means, with respect to an employer, an employee who normally 
     performs on a monthly basis at least 30 hours of service per 
     week for that employer.
       ``(4) Person.--The term `person' means any person that 
     offers a health insurance plan to a small employer, including 
     a licensed insurance company, a prepaid hospital or medical 
     service plan, a health maintenance organization, or in States 
     which have distinct insurance licensure requirements, a 
     multiple employer welfare arrangement.''.
       (b) Nondeductibility of Tax.--Paragraph (6) of section 
     275(a) of the Internal Revenue Code of 1986 (relating to 
     nondeductibility of certain taxes) is amended by inserting 
     ``47,'' after ``46,''.
       (c) Clerical Amendments.--The table of sections for such 
     chapter 47 of the Internal Revenue Code of 1986 is amended by 
     adding at the end thereof the following new item:

``Sec. 5000A. Failure to satisfy certain standards for health 
              insurance.''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by subsections (a) and 
     (c) shall take effect on the date of the enactment of this 
     Act.
       (2) Nondeductibility of tax.--The amendment made by 
     subsection (b) shall apply to taxable years beginning after 
     December 31, 1993.

                     PART III--STUDIES AND REPORTS

     SEC. 231. GAO STUDY AND REPORT ON RATING REQUIREMENTS AND 
                   BENEFIT PACKAGES FOR SMALL GROUP HEALTH 
                   INSURANCE.

       (a) In General.--The Comptroller General of the United 
     States shall study and report to the Congress by no later 
     than January 1, 1996, on--
       (1) the impact of the standards for rating practices for 
     small group health insurance established under section 2112 
     of the Social Security Act and the requirements for benefit 
     packages established under section 2113 of such Act on the 
     availability and price of insurance offered to small 
     employers, differences in available benefit packages, the 
     number of small employers choosing standard or basic 
     packages, and the impact of the standards on the number of 
     small employers offering health insurance to employees 
     through a self-funded employer welfare benefit plan; and
       (2) differences in State laws and regulations affecting the 
     availability and price of health insurance plans sold to 
     individuals and the impact of such laws and regulations, 
     including the extension of requirements for health insurance 
     plans sold to small employers in the State to individual 
     health insurance and the establishment of State risk pools 
     for individual health insurance.
       (b) Recommendations.--The Comptroller General shall include 
     in the report to Congress under this section recommendations 
     with respect to adjusting rating standards under section 2112 
     of the Social Security Act--
       (1) to eliminate variation in premiums charged to small 
     employers resulting from adjustments for such factors as 
     claims experience and health status, and
       (2) to eliminate variation in premiums associated with age, 
     sex, and other demographic factors.
  Subtitle C--Improvements in Portability of Private Health Insurance

     SEC. 241. EXCISE TAX IMPOSED ON FAILURE TO PROVIDE FOR 
                   PREEXISTING CONDITION.

       (a) In General.--Chapter 47 of the Internal Revenue Code of 
     1986 (relating to taxes on group health plans), as amended by 
     section 221, is amended by adding at the end thereof the 
     following new section:

     ``SEC. 5000B. FAILURE TO SATISFY PREEXISTING CONDITION 
                   REQUIREMENTS OF GROUP HEALTH PLANS.

       ``(a) General Rule.--There is hereby imposed a tax on the 
     failure of--
       ``(1) a group health plan to meet the requirements of 
     subsection (e), or
       ``(2) any person to meet the requirements of subsection 
     (f),

     with respect to any covered individual.
       ``(b) Amount of Tax.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) on any failure with respect to a covered 
     individual shall be $100 for each day in the noncompliance 
     period with respect to such failure.
       ``(2) Noncompliance period.--For purposes of this section, 
     the term `noncompliance period' means, with respect to any 
     failure, the period--
       ``(A) beginning on the date such failure first occurs, and
       ``(B) ending on the date such failure is corrected.
       ``(3) Correction.--A failure of a group health plan to meet 
     the requirements of subsection (e) with respect to any 
     covered individual shall be treated as corrected if--
       ``(A) such failure is retroactively undone to the extent 
     possible, and
       ``(B) the covered individual is placed in a financial 
     position which is as good as such individual would have been 
     in had such failure not occurred.

     For purposes of applying subparagraph (B), the covered 
     individual shall be treated as if the individual had elected 
     the most favorable coverage in light of the expenses incurred 
     since the failure first occurred.
       ``(c) Limitations on Amount of Tax.--
       ``(1) Tax not to apply where failure not discovered 
     exercising reasonable diligence.--No tax shall be imposed by 
     subsection (a) on any failure during any period for which it 
     is established to the satisfaction of the Secretary that none 
     of the persons referred to in subsection (d) knew, or 
     exercising reasonable diligence would have known, that such 
     failure existed.
       ``(2) Tax not to apply to failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) on any 
     failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected during the 30-day period 
     beginning on the first date any of the persons referred to in 
     subsection (d) knew, or exercising reasonable diligence would 
     have known, that such failure existed.
       ``(3) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive relative to the failure involved.
       ``(d) Liability for Tax.--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the following shall be liable for the tax imposed 
     by subsection (a) on a failure:
       ``(A) In the case of a group health plan other than a self-
     insured group health plan, the issuer.
       ``(B)(i) In the case of a self-insured group health plan 
     other than a multiemployer group health plan, the employer.
       ``(ii) In the case of a self-insured multiemployer group 
     health plan, the plan.
       ``(C) Each person who is responsible (other than in a 
     capacity as an employee) for administering or providing 
     benefits under the group health plan, health insurance plan, 
     or other health benefit arrangement (including a self-insured 
     plan) and whose act or failure to act caused (in whole or in 
     part) the failure.
       ``(2) Special rules for persons described in paragraph 
     (1)(c).--A person described in subparagraph (C) (and not in 
     subparagraphs (A) and (B)) of paragraph (1) shall be liable 
     for the tax imposed by subsection (a) on any failure only if 
     such person assumed (under a legally enforceable written 
     agreement) responsibility for the performance of the act to 
     which the failure relates.
       ``(e) No Discrimination Based on Health Status for Certain 
     Services.--
       ``(1) In general.--Except as provided under paragraph (2), 
     group health plans may not deny, limit, or condition the 
     coverage under (or benefits of) the plan based on the health 
     status, claims experience, receipt of health care, medical 
     history, or lack of evidence of insurability, of an 
     individual.
       ``(2) Treatment of preexisting condition exclusions for all 
     services.--
       ``(A) In general.--Subject to the succeeding provisions of 
     this paragraph, group health plans may exclude coverage with 
     respect to services related to treatment of a preexisting 
     condition, but the period of such exclusion may not exceed 6 
     months. The exclusion of coverage shall not apply to services 
     furnished to newborns.
       ``(B)  Crediting of previous coverage.--
       ``(i) In general.--A group health plan shall provide that 
     if an individual under such plan is in a period of continuous 
     coverage (as defined in clause (ii)(I)) with respect to 
     particular services as of the date of initial coverage under 
     such plan (determined without regard to any waiting period 
     under such plan), any period of exclusion of coverage with 
     respect to a preexisting condition for such services or type 
     of services shall be reduced by 1 month for each month in the 
     period of continuous coverage without regard to any waiting 
     period.
       ``(ii) Definitions.--As used in this subparagraph:

       ``(I) Period of continuous coverage.--The term `period of 
     continuous coverage' means, with respect to particular 
     services, the period beginning on the date an individual is 
     enrolled under a health insurance plan, title XVIII or XIX of 
     the Social Security Act, or other health benefit arrangement 
     (including a self-insured plan) which provides benefits with 
     respect to such services and ends on the date the individual 
     is not so enrolled for a continuous period of more than 3 
     months.
       ``(II) Preexisting condition.--The term `preexisting 
     condition' means, with respect to coverage under a group 
     health plan, a condition which has been diagnosed or treated 
     during the 3-month period ending on the day before the first 
     date of such coverage without regard to any waiting period.

       ``(f) Disclosure of Coverage, Etc.--Any person who has 
     provided coverage (other than under title XVIII or XIX of the 
     Social Security Act) during a period of continuous coverage 
     (as defined in subsection (e)(2)(B)(ii)(I)) with respect to a 
     covered individual shall disclose, upon the request of a 
     group health plan subject to the requirements of subsection 
     (e), the coverage provided the covered individual, the period 
     of such coverage, and the benefits provided under such 
     coverage.
       ``(g) Definitions.--For purposes of this section--
       ``(1) Covered individual.--The term `covered individual' 
     means--
       ``(A) an individual who is (or will be) provided coverage 
     under a group health plan by virtue of the performance of 
     services by the individual for 1 or more persons maintaining 
     the plan (including as an employee defined in section 
     401(c)(1)), and
       ``(B) the spouse or any dependent child of such individual.
       ``(2) Group health plan.--The term `group health plan' has 
     the meaning given such term by section 5000(b)(1).''.
       (b) Clerical Amendment.--The table of sections for such 
     chapter 47 of the Internal Revenue Code of 1986 is amended by 
     adding at the end thereof the following new item:

``Sec. 5000B. Failure to satisfy preexisting condition requirements of 
              group health plans.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 1994.
                Subtitle D--Health Care Cost Containment

     SEC. 251. FEDERAL CERTIFICATION OF MANAGED CARE PLANS AND 
                   UTILIZATION REVIEW PROGRAMS.

       Title XXI of the Social Security Act, as added by section 
     211, is amended by adding at the end the following part:

         ``Part C--Federal Certification of Managed Care Plans


 ``FEDERAL CERTIFICATION OF MANAGED CARE PLANS AND UTILIZATION REVIEW 
                                PROGRAMS

       ``Sec. 2114. (a)  Voluntary Certification Process.--
       ``(1) Certification.--The Secretary shall establish a 
     process for certification of managed care plans meeting the 
     requirements of subsection (b)(1) and of utilization review 
     programs meeting the requirements of subsection (b)(2).
       ``(2) Qualified managed care plan.--For purposes of this 
     title, the term `qualified managed care plan' means a managed 
     care plan that the Secretary certifies, upon application by 
     the program, as meeting the requirements of this section.
       ``(3) Qualified utilization review program.--For purposes 
     of this title, the term `qualified utilization review 
     program' means a utilization review program that the 
     Secretary certifies, upon application by the program, as 
     meeting the requirements of this section.
       ``(4) Utilization review program.--For purposes of this 
     title, the term `utilization review program' means a system 
     of reviewing the medical necessity, appropriateness, or 
     quality of health care services and supplies covered under a 
     health insurance plan or a managed care plan using specified 
     guidelines. Such a system may include preadmission 
     certification, the application of practice guidelines, 
     continued stay review, discharge planning, preauthorization 
     of ambulatory procedures, and retrospective review.
       ``(5) Managed care plan.--
       ``(A) In general.--For purposes of this title the term 
     `managed care plan' means a plan operated by a managed care 
     entity as described in subparagraph (B), that arranges for 
     the financing and delivery of health care services to persons 
     covered under such plan through--
       ``(i) arrangements with participating providers to furnish 
     health care services;
       ``(ii) explicit standards for the selection of 
     participating providers;
       ``(iii) organizational arrangements for ongoing quality 
     assurance and utilization review programs; and
       ``(iv) financial incentives for persons covered under the 
     plan to use the participating providers and procedures 
     provided for by the plan.
       ``(B) Managed care entity defined.--For purposes of this 
     title, a managed care entity includes a licensed insurance 
     company, hospital or medical service plan, health maintenance 
     organization, an employer, or employee organization, or a 
     managed care contractor as described in subparagraph (C), 
     that operates a managed care plan.
       ``(C) Managed care contractor defined.--For purposes of 
     this title, a managed care contractor means a person that--
       ``(i) establishes, operates or maintains a network of 
     participating providers;
       ``(ii) conducts or arranges for utilization review 
     activities; and
       ``(iii) contracts with an insurance company, a hospital or 
     medical service plan, an employer, an employee organization, 
     or any other entity providing coverage for health care 
     services to operate a managed care plan.
       ``(6) Participating provider.--The term `participating 
     provider' means a physician, hospital, pharmacy, laboratory, 
     or other appropriately licensed provider of health care 
     services or supplies, that has entered into an agreement with 
     a managed care entity to provide such services or supplies to 
     a patient covered under a managed care plan.
       ``(7) Review and recertification.--The Secretary shall 
     establish procedures for the periodic review and 
     recertification of qualified managed care plans and qualified 
     utilization review programs.
       ``(8) Termination of certification.--The Secretary shall 
     terminate the certification of a qualified managed care plan 
     or a qualified utilization review program if the Secretary 
     determines that such plan or program no longer meets the 
     applicable requirements for certification. Before effecting a 
     termination, the Secretary shall provide the plan notice and 
     opportunity for a hearing on the proposed termination.
       ``(9) Certification through alternative requirements.--
       ``(A) Certain organizations recognized.--An eligible 
     organization as defined in section 1876(b), shall be deemed 
     to meet the requirements of subsection (b) for certification 
     as a qualified managed care plan.
       ``(B) Recognition of accreditation.--If the Secretary finds 
     that a State licensure program or a national accreditation 
     body establishes a requirement or requirements for 
     accreditation of a managed care plan or utilization review 
     program that are at least equivalent to a requirement or 
     requirements established under subsection (b), the Secretary 
     may, to the extent he finds it appropriate, treat a managed 
     care plan or a utilization review program thus accredited as 
     meeting the requirement or requirements of subsection (b) 
     with respect to which he made such finding.
       ``(b) Requirements for Certification.--
       ``(1) Managed care plans.--The Secretary, in consultation 
     with the Health Care Cost Commission, shall establish Federal 
     standards for the certification of qualified managed care 
     plans, including standards related to--
       ``(A) the qualification and selection of participating 
     providers;
       ``(B) the number, type, and distribution of participating 
     providers necessary to assure that all covered items and 
     services are available and accessible to persons covered 
     under a managed care plan in each service area;
       ``(C) the establishment and operation of an ongoing quality 
     assurance program, which includes procedures for--
       ``(i) evaluating the quality and appropriateness of care;
       ``(ii) using the results of quality evaluations to promote 
     and improve quality of care; and
       ``(iii) resolving complaints from enrollees regarding 
     quality and appropriateness of care;
       ``(D) the provision of benefits for covered items and 
     services not furnished by participating providers if the 
     items and services are medically necessary and immediately 
     required because of an unforeseen illness, injury, or 
     condition;
       ``(E) the qualifications of individuals performing 
     utilization review activities;
       ``(F) procedures and criteria for evaluating the necessity 
     and appropriateness of health care services;
       ``(G) the timeliness with which utilization review 
     determinations are to be made;
       ``(H) procedures for the operation of an appeals process 
     which provides a fair opportunity for individuals adversely 
     affected by a managed care review determination to have such 
     determination reviewed;
       ``(I) procedures for ensuring that all applicable Federal 
     and State laws designed to protect the confidentiality of 
     individual medical records are followed; and
       ``(J) payment of providers for the expenses associated with 
     responding to requests for information needed to conduct a 
     utilization review.
       ``(2) Qualified utilization review programs.--The 
     Secretary, in consultation with the Health Care Cost 
     Commission, shall establish Federal standards for the 
     certification of qualified utilization review programs, 
     including standards related to--
       ``(A) the qualifications of individuals performing 
     utilization review activities;
       ``(B) procedures and criteria for evaluating the necessity 
     and appropriateness of health care services;
       ``(C) the timeliness with which utilization review 
     determinations are to be made;
       ``(D) procedures for the operation of an appeals process 
     which provides a fair opportunity for individuals adversely 
     affected by a utilization review determination to have such 
     determination reviewed;
       ``(E) procedures for ensuring that all applicable Federal 
     and State laws designed to protect the confidentiality of 
     individual medical records are followed; and
       ``(F) payment of providers for the expenses associated with 
     responding to requests for information needed to conduct a 
     utilization review.
       ``(3) Application of standards.--
       ``(A) In general.--Standards shall first be established 
     under this subsection by not later than 24 months after the 
     date of the enactment of this section. In developing 
     standards under this subsection, the Secretary shall--
       ``(i) review standards in use by national private 
     accreditation organizations and State licensure programs;
       ``(ii) recognize, to the extent appropriate, differences in 
     the organizational structure and operation of managed care 
     plans; and
       ``(iii) establish procedures for the timely consideration 
     of applications for certification by managed care plans and 
     utilization review programs.
       ``(B) Revision of standards.--The Secretary shall 
     periodically review the standards established under this 
     subsection, taking into account recommendations by the Health 
     Care Cost Commission, and may revise the standards from time 
     to time to assure that such standards continue to reflect 
     appropriate policies and practices for the cost-effective and 
     medically appropriate use of services within managed care 
     plans and utilization review programs.
       ``(c) Limitation on State Restrictions on Qualified Managed 
     Care Plans and Utilization Review Programs.--
       ``(1) In general.--No requirement of any State law or 
     regulation shall--
       ``(A) prohibit or limit a qualified managed care plan from 
     including financial incentives for covered persons to use the 
     services of participating providers;
       ``(B) prohibit or limit a qualified managed care plan from 
     restricting coverage of services to those--
       ``(i) provided by a participating provider; or
       ``(ii) authorized by a designated participating provider;
       ``(C) subject to paragraph (2)--
       ``(i) restrict the amount of payment made by a qualified 
     managed care plan to participating providers for items and 
     services provided to covered persons; or
       ``(ii) restrict the ability of a qualified managed care 
     plan to pay participating providers for items and services 
     provided to covered persons on a per capita basis;
       ``(D) prohibit or limit a qualified managed care plan from 
     restricting the location, number, type, or professional 
     qualifications of participating providers;
       ``(E) prohibit or limit a qualified managed care plan from 
     requiring that items and services be authorized by a primary 
     care physician selected by the covered person from a list of 
     available participating providers;
       ``(F) prohibit or limit the use of utilization review 
     procedures or criteria by a qualified utilization review 
     program or a qualified managed care plan;
       ``(G) require a qualified utilization review program or a 
     qualified managed care plan to make public utilization review 
     procedures or criteria;
       ``(H) prohibit or limit a qualified utilization review 
     program or a qualified managed care plan from determining the 
     location or hours of operation of a utilization review, 
     provided that emergency services furnished during the hours 
     in which the utilization review program is not open are not 
     subject to utilization review;
       ``(I) require a qualified utilization review program or a 
     qualified managed care plan to pay providers for the expenses 
     associated with responding to requests for information needed 
     to conduct utilization review, other than as provided in 
     standards for qualified managed care plans and qualified 
     utilization review programs;
       ``(J) restrict the amount of payment made to a qualified 
     utilization review program or a qualified managed care plan 
     for the conduct of utilization review;
       ``(K) restrict access by a qualified utilization review 
     program or a qualified managed care plan to medical 
     information or personnel required to conduct utilization 
     review;
       ``(L) define utilization review as the practice of medicine 
     or another health care profession; or
       ``(M) require that utilization review be conducted (i) by a 
     resident of the State in which the treatment is to be offered 
     or by an individual licensed in such State, or (ii) by a 
     physician in any particular specialty or with any board 
     certified specialty of the same medical specialty as the 
     provider whose services are being rendered.
       ``(2) Exceptions to certain requirements.--
       ``(A) Subparagraph (c).--Subparagraph (C) shall not apply 
     where the amount of payments with respect to a block of 
     services or providers is established under a statewide system 
     applicable to all non-Federal payors with respect to such 
     services or providers.
       ``(B) Subparagraphs (l) and (m).--Nothing in subparagraphs 
     (L) or (M) shall be construed as prohibiting a State from (i) 
     requiring that utilization review be conducted by a licensed 
     health care professional or (ii) requiring that any appeal 
     from such a review be made by a licensed physician or by a 
     licensed physician in any particular specialty or with any 
     board certified specialty of the same medical specialty as 
     the provider whose services are being rendered.
       ``(3) Relationship to medicaid program.--Nothing in 
     paragraph (1) shall be construed as prohibiting a State from 
     imposing requirements on managed care plans or utilization 
     review programs that are necessary to conform with the 
     requirements of title XIX of the Social Security Act with 
     respect to services provided to, or with respect to, 
     individuals receiving medical assistance under such title.''.
          TITLE III--HEALTH INSURANCE COSTS FOR SELF-EMPLOYED

     SEC. 301. HEALTH INSURANCE COSTS FOR SELF-EMPLOYED.

       (a) Permanent Extension.--Section 162(l) of the Internal 
     Revenue Code of 1986 (relating to special rules for health 
     insurance costs of self-employed individuals) is amended by 
     striking paragraph (6).
       (b) Increase in Deduction.--Section 162(l)(1) of the 
     Internal Revenue Code of 1986 is amended by striking ``25 
     percent of''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1994.
                                 ______

      By Mrs. MURRAY (for herself, Mrs. Feinstein, Ms. Moseley-Braun, 
        Mrs. Boxer, Mr. Kennedy, and Mr. Durenberger):
  S. 1979. A bill to require employers to post, and to provide to 
employees individually, information relating to sexual harassment that 
violates title VII of the Civil Rights Act of 1964, and for other 
purposes; to the Committee on Labor and Human Resources.


                  the sexual harassment prevention act

 Mrs. MURRAY. Mr. President, today I am introducing the Sexual 
Harassment Prevention Act of 1994 on behalf of myself and Senators 
Feinstein, Moseley-Braun, Boxer, Kennedy, and Durenberger.
  Sexual harassment in the workplace persists today despite our 
heightened awareness of the problem. Studies published about a broad 
variety of workplaces between 1986 and 1993 found that 40 to 70 percent 
of women workers in the United States experience some form of sexual 
harassment.
  In addition, Mr. President, the vast majority of sexual harassment 
episodes go unreported. Experts estimate only 7 percent or fewer of 
incidents ever reach the formal complaint process.
  Sexual harassment in the workplace also costs employers a great deal. 
A 1988 study by Working Woman showed that a typical Fortune 500 company 
spends $6 million per year--a cost of $292.53 per employee--addressing 
sexual harassment complaints. The study estimates it is 34 times more 
expensive for employers to ignore the problem than to establish 
effective programs and policies to correct it.
  In fact, many large companies have established education and 
prevention programs in addition to internal grievance procedures. 
However, Mr. President, much of the future job growth in this Nation 
will be in smaller companies. Establishing sexual harassment programs 
in small businesses should be a routine and low-cost effort. This 
legislation should assist this effort.
  The Federal Government can help end the pervasiveness of sexual 
harassment in the workplace by instituting a proactive policy to 
correct the problem.
  The Sexual Harassment Prevention Act of 1994 will help increase 
awareness, decrease violations, and lighten the burden of costly and 
time-consuming litigation brought about by sexual harassment lawsuits.
  This legislation will require businesses, including the Federal 
Government and Congress, to post notice of: the definition of sexual 
harassment; how to file a grievance with the U.S. Equal Employment 
Opportunity Commission or other appropriate entity; and the statute of 
limitations for such a filing.
  Employers will be required to supply each employee with an individual 
notice of this information, as well as the internal grievance 
procedures established by the employer.
  Employers also will be required to provide supervisory employees with 
information explaining the internal grievance procedures, and the 
responsibility of the supervisor to take corrective action when a 
violation is reported.
  Finally, the EEOC will provide model notices of this information, 
voluntary guidelines for internal grievance procedures, and a toll-free 
number for information on compliance with this act.
  Mr. President, the EEOC has indicated the cost of implementing this 
legislation would be minimal. I urge my colleagues to join me to enact 
a low-cost remedial measure to help end sexual harassment in workplaces 
across our Nation.
  Mr. President, I ask that the text of the legislation be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1979

       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 ``Sexual Harassment Prevention 
     Act of 1994''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds the following:
       (1) Sexual harassment in employment persists widely in the 
     workplace, although it violates title VII of the Civil Rights 
     Act of 1964 (42 U.S.C. 2000e et seq.) and adversely affects 
     employees.
       (2) According to guidelines issued by the Equal Employment 
     Opportunity Commission in 1980, the most effective tool for 
     eliminating sexual harassment is prevention.
       (3) The Merit Systems Protection Board found in 1981 and 
     1988 surveys of Federal Government employees that 42 percent 
     of female employees and 14 percent of male employees 
     questioned had experienced some kind of harassment in 
     employment. The American Psychological Association estimates 
     that at least 50 percent of all working women have been 
     sexually harassed at the workplace during their careers.
       (4) The vast majority of sexual harassment episodes go 
     unreported to a supervisory employee or other individual 
     designated by the employer. Only 5 percent of the Government 
     employees who indicated in the 1988 Merit Systems Protection 
     Board survey that they had been harassed filed a formal 
     complaint or requested an investigation of the harassment.
       (5) Sexual harassment has a significant cost for employees 
     and employers. A 1988 study by Working Woman Magazine shows 
     that sexual harassment costs a typical ``Fortune 500'' 
     employer $6,000,000, or $292.53 per employee, each year. The 
     same study estimates that it is 34 times more expensive for 
     such an employer to ignore the problem than to establish 
     effective programs and policies to address the problem.
       (b) Purposes.--The purposes of this Act are--
       (1) to establish workplace requirements that will reduce 
     the incidence of sexual harassment in employment;
       (2) to provide a low-cost system to assist employers to 
     establish programs and policies to prevent sexual harassment 
     in employment;
       (3) to raise the awareness of employees of the definition 
     of sexual harassment and of available avenues of redress; and
       (4) to increase the authority and capacity of the Equal 
     Employment Opportunity Commission, and other enforcement 
     agencies, to assist in preventing sexual harassment in 
     employment.

     SEC. 3. EMPLOYER REQUIREMENTS.

       (a) Posting of Notice in the Workplace.--Each employer 
     shall post and keep posted in conspicuous places upon its 
     premises where notices to employees and applicants for 
     employment are customarily posted, a notice that shall be 
     prepared or approved by the appropriate primary enforcement 
     agency and shall set forth--
       (1) the definition of sexual harassment found in section 
     1604.11(a) of title 29, Code of Federal Regulations (or any 
     corresponding similar regulation);
       (2) the fact that sexual harassment in employment is a 
     violation of Federal law;
       (3) information describing how to file with the primary 
     enforcement agency a complaint alleging such harassment, 
     including information on the time periods within which an 
     alleged victim of discrimination (including sexual 
     harassment) must file a charge with the primary enforcement 
     agency, or a State or local fair employment agency, in order 
     to satisfy the applicable statute of limitations;
       (4) an address, and the toll-free telephone number, to be 
     used to contact the appropriate enforcement agency regarding 
     such harassment or compliance with the requirements of this 
     Act; and
       (5) such other information as the primary enforcement 
     agency may require.
       (b) Separate Notice to Individual Employees.--
       (1) Contents.--Each employer shall provide annually to each 
     employee individually a written notice that includes--
       (A) the information specified in paragraphs (1) through (4) 
     of subsection (a);
       (B) a description of the procedures established by such 
     employer to resolve allegations of sexual harassment in 
     employment; and
       (C) such other information as the appropriate primary 
     enforcement agency may require.
       (2) Manner of notice.--Such notice shall be provided in a 
     manner that ensures that such employee actually receives such 
     notice.
       (c) Management Information for Supervisory Employees.--Not 
     later than 60 days after an employer places an individual in 
     a supervisory employment position or 1 year after the date of 
     the enactment of this Act, whichever occurs later, such 
     employer shall provide to the supervisory employee 
     information specifying the responsibilities of, and the 
     methods to be used by, such employee to ensure that immediate 
     and corrective action is taken to address allegations of 
     sexual harassment in employment.
       (d) Civil Penalty.--A willful violation of this section 
     shall be punishable by a civil penalty of not more than 
     $1,000 for each separate violation.

     SEC. 4. DUTIES OF THE ENFORCEMENT AGENCIES.

       (a) Technical Assistance Materials.--
       (1) In general.--Not later than 180 days after the date of 
     the enactment of this Act, each primary enforcement agency 
     shall prepare and make available to employers at no cost to 
     the employers (by publication in the Federal Register or 
     other means)--
       (A) a model notice of the kind required by section 3(a) to 
     be posted;
       (B) a model notice of the kind required by section 3(b) to 
     be provided to employees; and
       (C) voluntary guidelines for the establishment of policies 
     and procedures by employers to address allegations of 
     discrimination (including sexual harassment) in employment.
       (2) Revisions.--The primary enforcement agency shall 
     periodically review and, as appropriate, revise the notices 
     and guidelines described in subparagraphs (A) through (C) of 
     paragraph (1).
       (b) Toll-Free Telephone Number.--Not later than 180 days 
     after the date of the enactment of this Act, the primary 
     enforcement agency shall provide a toll-free telephone number 
     for use by employees and employers in the United States to 
     obtain--
       (1) information regarding compliance with this Act; and
       (2) the model notices and guidelines prepared under 
     subsection (a).

     SEC. 5. ENFORCEMENT.

       (a) Private Employees; Executive Employees; Employees of 
     Instrumentalities; State Employees.--If an employee described 
     in subparagraph (A), (B), (E), or (F) of section 6(2) alleges 
     a violation of section 3, the Commission shall enforce the 
     section in the same manner as the Commission enforces section 
     711 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-10).
       (b) House of Representatives Employees.--
       (1) Hearing.--If an employee described in section 6(2)(C) 
     alleges a violation of section 3, the Office of Fair 
     Employment Practices of the House of Representatives (or such 
     entity as the House of Representatives may designate) shall 
     consider the allegation in accordance with the hearing 
     procedures provided in clause 6 of Rule LI of the Rules of 
     the House of Representatives of the 103d Congress (or any 
     other provision that continues in effect the provisions of 
     such rule). In carrying out such procedures, such Office or 
     entity shall permit an employee, or a representative of the 
     Office or entity, to file a complaint not later than 180 days 
     after the alleged violation, and shall not require compliance 
     with any counseling and mediation procedures provided in such 
     rule or provision.
       (2) Review.--Any party to a proceeding conducted under 
     paragraph (1) may seek review of a final decision resulting 
     from such proceeding. Such review shall be conducted by such 
     Office or entity in accordance with the review procedures 
     provided in clause 7 of such rule (or such other provision).
       (3) Procedures.--In conducting a proceeding under paragraph 
     (1) or (2), such Office or entity shall conduct the 
     proceeding in accordance with any requirement of such rule 
     (or such other provision) that relates to such a proceeding, 
     including a requirement relating to agreements, costs, closed 
     hearings and confidentiality, and requests for witnesses and 
     information.
       (4) Remedies.--Following a proceeding under paragraph (1) 
     or (2), if the Office or entity finds that an employer is not 
     in compliance with section 3, such Office or entity may order 
     the civil penalty described in section 3(d).
       (c) Senate Employees.--
       (1) Hearing.--If an employee described in section 6(2)(D) 
     alleges a violation of section 3, the Office of Senate Fair 
     Employment Practices (or such entity as the Senate may 
     designate) shall consider the allegation in accordance with 
     the hearing procedures provided in section 307 of the 
     Government Employee Rights Act of 1991 (2 U.S.C. 1207) (or 
     any other provision that continues in effect the provisions 
     of such Act). In carrying out such procedures, such Office or 
     entity shall permit an employee, or a representative of such 
     Office or entity, to file a complaint not later than 180 days 
     after the alleged violation, and shall not require compliance 
     with any counseling and mediation procedures provided in such 
     Act or provision.
       (2) Review.--Any party to a proceeding conducted under 
     paragraph (1) may seek review of a final decision resulting 
     from such proceeding. Such review shall be conducted by the 
     Select Committee on Ethics (or by such entity as the Senate 
     may designate) in accordance with the review procedures 
     provided in section 308 of such Act (or such other 
     provision).
       (3) Judicial review.--Any party to a proceeding conducted 
     under paragraph (2) may seek review of a final decision 
     resulting from such proceeding. Such review shall be 
     conducted by the United States Court of Appeals for the 
     Federal Circuit in accordance with the procedures provided in 
     section 309 of such Act.
       (4) Procedures.--In conducting a proceeding under paragraph 
     (1) or (2), the appropriate Office, Committee, or entity 
     shall conduct the proceeding in accordance with any 
     requirement of such Act (or such other provision) that 
     relates to such a proceeding, including a requirement 
     relating to agreements, costs, closed hearings and 
     confidentiality, and requests for witnesses and information.
       (5) Remedies.--Following a proceeding under paragraph (1), 
     (2), or (3), if the appropriate Office, Committee, entity, or 
     court finds that an employer is not in compliance with 
     section 3, the Office, Committee, entity, or court may order 
     the civil penalty described in section 3(d).

     SEC. 6. DEFINITIONS.

       As used in this Act:
       (1) Commission.--The term ``Commission'' means the Equal 
     Employment Opportunity Commission.
       (2) Employee.--The term ``employee'' means--
       (A) an employee as defined in section 701(f) of the Civil 
     Rights Act of 1964 (42 U.S.C. 2000e(f));
       (B) an employee referred to in section 717(a) of such Act 
     (42 U.S.C. 2000e-16(a));
       (C) an employee in an employment position of the House of 
     Representatives;
       (D) a Senate employee as defined in section 301(c)(1) of 
     the Government Employee Rights Act of 1991 (2 U.S.C. 
     1201(c)(1));
       (E) an employee (other than an employee described in 
     subparagraph (B) or (D)) in an employment position of an 
     instrumentality of the Congress; and
       (F) an individual referred to in section 321(a) of the 
     Civil Rights Act of 1991 (2 U.S.C. 1220(a)).
       (3) Employer.--The term ``employer'' means--
       (A) an employer as defined in section 701(b) of the Civil 
     Rights Act of 1964 (42 U.S.C. 2000e(b));
       (B) a Federal entity, or entity of the Government of the 
     District of Columbia, to which section 717(a) of the Civil 
     Rights Act of 1964 (42 U.S.C. 2000e-16(a)) applies;
       (C) an employing authority of the House of Representatives, 
     of the Senate, or of an instrumentality of the Congress; and
       (D) an elected official described in section 321(a) of the 
     Civil Rights Act of 1991.
       (4) Instrumentality of the congress.--The term 
     ``instrumentality of the Congress'' means the Architect of 
     the Capitol, the Congressional Budget Office, the General 
     Accounting Office, the Government Printing Office, the 
     Library of Congress, the Office of Technology Assessment, the 
     United States Botanic Garden, and any other office of the 
     legislative branch of the Federal Government.
       (5) Primary enforcement agency.--The term ``primary 
     enforcement agency'' means--
       (A) with respect to any matter relating to an allegation of 
     sexual harassment of an employee described in subparagraph 
     (A), (B), (E), or (F) of paragraph (2), the Commission;
       (B) with respect to any matter relating to an allegation of 
     sexual harassment of an employee described in paragraph 
     (2)(C), the Office of Fair Employment Practices of the House 
     of Representatives (or such entity as the House of 
     Representatives may designate); and
       (C) with respect to any matter relating to an allegation of 
     sexual harassment of an employee described in paragraph 
     (2)(D), the Office of Senate Fair Employment Practices (or 
     such entity as the Senate may designate).
       (6) Sexual harassment.--The term ``sexual harassment'' has 
     the same meaning as such term has for purposes of title VII 
     of the Civil Rights Act of 1964 (42 U.S.C. 2000e et seq.).

     SEC. 7. EFFECTIVE DATES.

       (a) General Effective Date.--Except as provided in 
     subsection (b), this Act shall take effect on the date of the 
     enactment of this Act.
       (b) Employer Requirements.--Section 3 shall take effect 1 
     year after the date of the enactment of this Act.
                                 ______

      By Mr. JOHNSTON:
  S. 1980. A bill to establish the Cane River Creole National 
Historical Park and the Cane River National Heritage Area in the State 
of Louisiana, and for other purposes; to the Committee on Energy and 
Natural Resources.


  cane river creole national historical park and national heritage act

 Mr. JOHNSTON. Mr. President, I am very pleased to introduce 
legislation to establish the Cane River Creole National Historical Park 
and National Heritage Area in northwestern Louisiana.
  This proposal is the result of a special resource study begun in 1990 
pursuant to Public Law 101-512, at the request of my former colleague 
from the then Fifth District of Louisiana, Jerry Huckaby. The study was 
completed last year.
  The study area boundary included the historic district of the city of 
Natchitoches, Cane River Lake, and 4 miles along the Cane River to 
Cloutierville. A number of important sites, structures, and landscapes 
were examined in this area, including the Natchitoches Historic 
District--a national landmark; Kate Chopin's home, known locally as 
Bayou Folk--a national landmark; Melrose Plantation--a national 
landmark; the Badin Roque House--a Creole bousillage poteaux-en-terre 
structure listed on the National Register; Oakland and Magnolia 
Plantations--both bicentennial farms and both listed on the National 
Register; Cherokee and Beau Fort Plantations--both listed on the 
National Register; and two State commemorative areas, both of which are 
listed as national landmarks--Fort Jesup and Los Adaes.
  Of these sites and structures, the study concluded that two meet 
National Park Service new area criteria for national significance, 
suitability, and feasibility: Oakland Plantation--according to the 
study, ``an outstanding example of a nearly intact southern plantation 
agricultural complex'' with 22 surviving dependencies, half from the 
antebellum period--and the dependencies of Magnolia Plantation, known 
as the Magnolia Complex, which are owned by Museum Contents, Inc., a 
section 501(c)(3) organization. These structures include an unusual 
wooden cotton press and gin, bousillage overseer's house, and a number 
of intact brick slave quarters. Consistent with National Park Service 
practice, several strategies and management alternatives were developed 
to preserve and interpret the rich and unusual resources of this area, 
as well as an analysis of taking no action.

  This report was considered by the National Park System Advisory Board 
during its 110th meeting on August 11, 1993. The Board adopted a 
resolution agreeing that Oakland Plantation and certain outbuildings of 
Magnolia Plantation are ``suitable and feasible additions to the 
National Park System.'' Moreover, the Board also recommended that other 
sites in the Cane River region ``would best be protected through 
partnerships'' with the National Park Service, and recommended that the 
Secretary transmit these findings to the Congress with the study.
  In the transmission of this report on January 12, 1994, the 
Department recommended as the preferred alternative the creation of a 
new unit of the National Park System which would combine Park Service 
ownership and management of two sites--Oakland Plantation and the 
dependencies known as the Magnolia Complex--with a Cane River heritage 
partnership based on the development of a series of cooperative 
agreements between private, local, State, and Federal entities to 
provide for comprehensive interpretation and preservation of the entire 
area.

  The legislation provides for acquisition of property owned by Museum 
Contents, Inc., a section 501(c)(3) nonprofit organization. I and my 
family have previously made donations of property to this foundation, 
and the legislation specifies that property from Museum Contents can 
only be acquired by donation. Neither my wife nor I hold any position 
in this organization.
  This area of Louisiana has a fascinating history. Established in 1714 
by Louis Juchereau de St. Denis, Natchitoches is the oldest permanent 
settlement in the Louisiana Purchase territory. Located in Natchitoches 
was the westernmost fort of the French Empire, Fort St. Jean Baptiste, 
which served for many years as a strategic outpost and center for trade 
on the Red River. In 1717, the Spanish authorities in Texas responded 
to French expansion by establishing a mission post and later presidio 
at Los Adaes, 14 miles southwest of Natchitoches. Los Adaes later 
became the capital of Texas.
  Until the end of the Seven Years War, or French and Indian War, in 
1763 this frontier area was the site of considerable contraband trade 
between the French and the Spanish and with the local Caddo Indians. 
With the Treaties of Fontainebleau and Paris, signed in 1762 and 1763 
respectively, the Seven years War came to an end, and the French were 
expelled from North America. In 1767, this part of the French Empire 
was ceded to Spain.
  Unlike French settlers in Canada, many of whom eventually resettled 
in south Louisiana during the Acadian diaspora, little impact was felt 
in the daily lives of French settlers in northwest Louisiana by virtue 
of change in European rule. The conversion of the frontier economy 
based on trapping and hunting to an agricultural economy--first tobacco 
and indigo and, after 1810, cotton--had a more profound impact for 
which this change came the introduction of a plantation economy based 
on slave labor.
  In 1803, this area was ceded to France by Spain, and shortly 
thereafter the American Ambassador to France, Robert Livingston, 
negotiated the far-sighted and wise Louisiana Purchase, giving 
jurisdiction of this area and the entire Mississippi Valley to the 
United States. Later this area was the site of several major Civil War 
battles during the Red River campaign in the spring of 1864.
  The early years of French and Spanish domination, and the relative 
isolation of this area, left a lasting legacy in the Natchitoches 
Parish area. In part, this legacy resulted in the development and 
nurturing of a unique culture on Isle Brevelle, the Cane River Creoles 
of color, an exceptional community which exists today. Cloutierville 
retains its French small village flavor; French continued to be spoken 
there until after World War I. Life in and the folkways of 
Cloutierville were also the basis for many of the fictional writings of 
Kate Chopin, who lived in Cloutierville between 1879 and 1884 and whose 
works are now receiving renewed interest. Melrose Plantation has a 
similarly interesting history, from its legendary roots with the 
Metoyer family through the early 20th century writers' projects 
sponsored by Miss Cammie Henry.
  The real value of the proposed historical park, in addition to 
preserving important sites, structures, and landscapes, will be in 
bringing the objective, professional approach of the National Park 
Service to the interpretation of these and other resources in the area. 
To assist the Park Service in this effort, and to assure that all 
segments of the community are involved in the interpretive plan, 
section 8 establishes the Cane River National Heritage Area Commission. 
Among the Commission's duties will be consultation with the Secretary 
on the preparation of the general management plan for the historical 
park. More important, the Commission will be empowered to make grants 
to assist in studies that ``identify, preserve, and plan'' for the 
management of the area and to prepare an interpretive plan ``to address 
the cultural and natural history of the area.''
  I have discussed the study and the legislative concept extensively 
with as many groups as possible in the Natchitoches Parish area. All 
groups have been in full support and are very enthusiastic about Park 
Service involvement. I hope we can move forward very quickly with this 
proposal and that it will be enacted this year.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1980

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Cane River Creole National 
     Historical Park and National Heritage Area Act.''

     SEC. 2. FINDINGS AND PURPOSE.

       (a) Findings.--The Congress finds that--
       (1) the Natchitoches area along Cane River, established in 
     1714, is the oldest permanent settlement in the Louisiana 
     Purchase territory;
       (2) the Cane River area is the locale of the development of 
     Creole culture, from French-Spanish interactions of the early 
     18th century to today's living communities;
       (3) the Cane River, historically a segment of the Red 
     River, provided the focal point for early settlement, serving 
     as a transportation route upon which commerce and 
     communication reached all parts of the colony;
       (4) although a number of Creole structures, sites, and 
     landscapes exist in Louisiana and elsewhere, unlike the Cane 
     River area, most are isolated examples, and lack original 
     outbuilding complexes or integrity;
       (5) the Cane River area includes a great variety of 
     historical features with original elements in both rural and 
     urban settings and a cultural landscape that represents 
     various aspects of Creole culture, providing the base for a 
     holistic approach to understanding the broad continuum of 
     history within the region;
       (6) the Cane River region includes the Natchitoches 
     National Historic Landmark District, composed of 
     approximately 300 publicly and privately owned properties, 
     four other national historic landmarks, and other structures 
     and sites that may meet criteria for landmark significance 
     following further study;
       (7) historic preservation within the Cane River area has 
     greatly benefited from individuals and organizations that 
     have strived to protect their heritage and educate others 
     about their rich history; and
       (8) because of the complexity and magnitude of preservation 
     needs in the Cane River area, and the vital need for a 
     culturally sensitive approach, a partnership approach is 
     desirable for addressing the many preservation and 
     educational needs.
       (b) Purpose.--The purposes of this Act are to:
       (1) recognize the importance of the Cane River Creole 
     culture as a nationally significant element of the cultural 
     heritage of the United States;
       (2) establish a Cane River Creole National Historical Park 
     to serve as the focus of interpretive and educational 
     programs on the history of the Cane River area and to assist 
     in the preservation of certain historic sites along the 
     river; and
       (3) establish a Cane River National Heritage Area and 
     Commission to be undertaken in partnership with the State of 
     Louisiana, the City of Natchitoches, local communities and 
     settlements of the Cane River area, preservation 
     organizations, and private landowners, with full recognition 
     that programs must fully involve the local communities and 
     landowners.

              TITLE I--CANE RIVER NATIONAL HISTORICAL PARK

     SEC. 101. ESTABLISHMENT

       (a) In General.--In order to assist in the preservation and 
     interpretation of, and education concerning, the Creole 
     culture and diverse history of the Natchitoches region, and 
     to provide technical assistance to a broad range of public 
     and private landowners and preservation organizations, there 
     is hereby established the Cane River Creole National 
     Historical Park (hereinafter in this Act referred to as the 
     ``historical park'').
       (b) Area Included.--The historical park shall consist of 
     lands and interests therein as follows:
       (1) lands and structures associated with the Oakland 
     Plantation as depicted on map CARI, 80,002, dated January 
     1994;
       (2) lands and structures owned or acquired by Museum 
     Contents, Inc. as depicted on map CARI, 80,001, dated January 
     1994;
       (3) sites that may be the subject of cooperative agreements 
     with National Park Service for the purposes of historic 
     preservation and interpretation including, but not limited 
     to, the Melrose Plantation, the Badin-Roque site, the 
     Cherokee Plantation, the Beau Fort Plantation, and sites 
     within the Natchitoches National Historical Landmark 
     District: Provided, That such sites may not be added to the 
     historical park unless the Secretary of the Interior 
     (hereinafter referred to as the ``Secretary'') determines, 
     based on further research and planning, that such sites meet 
     the applicable criteria for national historical significance, 
     suitability, and feasibility, and notification of the 
     proposed addition has been transmitted to the Committee on 
     Energy and Natural Resources of the United States Senate and 
     the appropriate Committees of the House of Representatives; 
     and
       (4) not to exceed 10 acres of land that the Secretary may 
     designate for an interpretive visitor center complex to serve 
     the needs of the historical park and heritage area 
     established in title II of this Act.

     SEC. 102. ADMINISTRATION.

       (a) In General.--The Secretary shall administer the 
     historical park in according with this Act, and with 
     provisions of law generally applicable to units of the 
     National Park System, including the Act entitled ``An Act to 
     establish a National Park Service, and for other purposes,'' 
     approved August 25, 1916 (39 Stat. 535; 16 U.S.C. 1, 2-4); 
     and the Act of August 21, 1935 (49 Stat. 666, 16 U.S.C. 461-
     467). The Secretary shall manage the historical park in such 
     a manner as will preserve resources and cultural landscapes 
     relating to the Creole culture of the Cane River and enhance 
     public understanding of the important cultural heritage of 
     the Cane River region.
       (b) Donations.--The Secretary may accept and retain 
     donations of funds, property, or services from individuals, 
     foundations, or other public or private entities for the 
     purposes of providing programs, services, facilities, or 
     technical assistance that further the purposes of this Act.
       (c) Interpretive Center.--The Secretary is authorized to 
     construct, operate, and maintain an interpretive center on 
     lands identified by the Secretary pursuant to section 
     101(b)(4) of this title. Such center shall provide for the 
     general information and orientation needs of the historical 
     park and the heritage area. The Secretary shall consult with 
     the State of Louisiana, the City of Natchitoches, the 
     Association for the Preservation of Historic Natchitoches, 
     and the Cane River National Heritage Area Commission pursuant 
     to section 202 of this Act in the planning and development of 
     the interpretive center.
       (d) Cooperative Agreements and Technical Assistance.--(1) 
     The Secretary, after consultation with the Cane River 
     National Heritage Area Commission established pursuant to 
     section 202 of this Act, is authorized to enter into 
     cooperative agreements with owners of properties within the 
     heritage area and owners of properties within the historical 
     park that provide important educational and interpretive 
     opportunities relating to the heritage of the Cane River 
     region. The Secretary may also enter into cooperative 
     agreements for the purpose of facilitating the preservation 
     of important historic sites and structures identified in the 
     historical park's general management plan or other heritage 
     elements related to the heritage of the Cane River region. 
     Such cooperative agreements shall specify that the National 
     Park Service shall have reasonable rights of access for 
     operational and visitor use needs and that preservation 
     treatments will meet the Secretary's standards for 
     rehabilitation of historic buildings.
       (2) The Secretary is authorized to enter into cooperative 
     agreements with the City of Natchitoches, the State of 
     Louisiana, and other public or private organizations for the 
     development of the interpretive center, educational programs, 
     and other materials that will facilitate public use of the 
     historical park and heritage area.
       (e) Research.--The Secretary, acting through the National 
     Park Service, shall coordinate a comprehensive research 
     program on the complex history of the Cane River region, 
     including ethnography studies of the living communities along 
     the Cane River, and how past and present generations have 
     adapted to their environment, including genealogical studies 
     of families within the Cane River area. Research shall 
     include, but not be limited to, the extensive primary 
     historic documents within the Natchitoches and Cane River 
     areas, and curation methods for their care and exhibition. 
     The research program shall be coordinated with Northwestern 
     State University of Louisiana, and the National Center for 
     Preservation Technology and Training in Natchitoches.

     SEC. 103. ACQUISITION OF PROPERTY.

       (a) General Authority.--Except as otherwise provided in 
     this section, the Secretary is authorized to acquire lands 
     and interests therein within the boundaries of the historical 
     park by donation, purchase with donated or appropriated 
     funds, or exchange.
       (b) State and Local Properties.--Lands and interests 
     therein that are owned by the State of Louisiana, or any 
     political subdivision thereof, may be acquired only by 
     donation or exchange.
       (c) Museum Contents, Inc.--Lands and structures identified 
     in section 101(b)(2) may be acquired only by donation.
       (d) Cooperative Agreement Sites.--Lands and interests 
     therein that are the subject of cooperative agreements 
     pursuant to section 101(b)(3) shall not be acquired except 
     with the consent of the owner thereof.

     SEC. 104. GENERAL MANAGEMENT PLAN.

       Within 3 years after the date funds are made available 
     therefor and in consultation with the Cane River Heritage 
     Area Commission, the National Park Service shall prepare a 
     general management plan for the historical park. The plan 
     shall include, but need not be limited to--
       (1) a visitor use plan indicating programs and facilities 
     that will be provided for public use, including the location 
     and cost of an interpretive center;
       (2) programs and management actions that the National Park 
     Service will undertake cooperatively with the heritage area 
     commission, including preservation treatments for important 
     sites, structures, objects, and research materials. Planning 
     shall address educational media, roadway signing, and 
     brochures that could be prepared jointly with the Commission 
     pursuant to section 203 of this Act; and
       (3) preservation and use plans for any sites and structures 
     that are identified for National Park Service involvement 
     through cooperative agreements.

              TITLE II--CANE RIVER NATIONAL HERITAGE AREA.

      SEC. 201. ESTABLISHMENT OF THE CANE RIVER NATIONAL HERITAGE 
                   AREA.

       (a) Establishment.--There is hereby established the Cane 
     River National Heritage Area (hereinafter referred to as the 
     ``heritage area'').
       (b) Purpose.--In furtherance of the need to recognize the 
     value and importance of the Cane River region and in 
     recognition of the findings of section 2(a) of this Act, it 
     is the purpose of this title to establish a heritage area to 
     complement the historical park and to provide for a 
     culturally sensitive approach to the preservation of the 
     heritage of the Cane River region, and for other needs 
     including--
       (1) recognizing areas important to the Nation's heritage 
     and identity;
       (2) assisting in the preservation and enhancement of the 
     cultural landscape and traditions of the Cane River region;
       (3) providing a framework for those who live within this 
     important dynamic cultural landscape to assist in 
     preservation and educational actions; and
       (4) minimizing the need for Federal land acquisition and 
     management.
       (c) Area Included.--The heritage area shall include--
       (1) an area approximately 1 mile on both sides of the Cane 
     River as depicted on map CARI, 80,000, dated January 1994;
       (2) the Natchitoches National Historical Landmark District;
       (3) the Los Adaes State Commemorative Area;
       (4) the Fort Jesup State Commemorative Area;
       (5) the Fort St. Jean Baptiste State Commemorative Area; 
     and
       (6) the Kate Chopin House.
       A final identification of all areas and sites to be 
     included in the heritage area shall be included in the 
     heritage area management plan as required in section 203 of 
     this title.

     SEC. 202. CANE RIVER NATIONAL HERITAGE AREA COMMISSION.

       (a) Establishment.--To assist in implementing the purposes 
     of this Act and to provide guidance for the management of the 
     heritage area, there is established the Cane River National 
     Heritage Area Commission (hereinafter referred to as the 
     ``Commission'').
       (b) Membership.--The Commission shall consist of 16 members 
     to be appointed no later than 6 months after the date of 
     enactment of this Act. The Commission shall be appointed by 
     the Secretary as follows--
       (1) one member from recommendations submitted by the Mayor 
     of Natchitoches;
       (2) one member from recommendations submitted by the 
     Association for the preservation of Historic Natchitoches;
       (3) one member from recommendations submitted by the 
     Natchitoches Historic Foundation, Inc.;
       (4) one member with experience in and knowledge of tourism 
     in the greater Cane River region, from recommendations 
     submitted by local businesses;
       (5) one member from recommendations submitted by the 
     Governor of the State of Louisiana;
       (6) one member from recommendations submitted by the Police 
     Jury of Natchitoches Parish;
       (7) one member from recommendations submitted by the 
     Concerned Citizens of Cloutierville;
       (8) one member from recommendations submitted by the St. 
     Augustine Historical Society;
       (9) one member from recommendations submitted by the Black 
     Heritage Committee;
       (10) one member from recommendations submitted by the Los 
     Adaes/Robeline Community;
       (11) one member from recommendations submitted by the 
     Natchitoches Historic District Commission;
       (12) one member from recommendations submitted by the Cane 
     River Waterway Commission;
       (13) one member who is a landowner along the Cane River;
       (14) one member with experience and knowledge of historic 
     preservation from recommendations submitted by Museum 
     Contents, Inc.;
       (15) one member with experience and knowledge of historic 
     preservation from recommendations submitted by the President 
     of Northwestern State University of Louisiana; and
       (16) the director of the National Park Service, or the 
     Director's designee, ex officio.
       (c) Duties of the Commission--The Commission shall--
       (1) prepare a management plan for the heritage area in 
     consultation with the National Park Service, the State of 
     Louisiana, the City of Natchitoches, Natchitoches Parish, 
     interested groups, property owners, and the public;
       (2) consult with the Secretary on the preparation of the 
     general management plan for the historical park;
       (3) develop partnerships with property owners, preservation 
     groups, educational groups, the State of Louisiana, the City 
     of Natchitoches, universities, and tourism groups, and other 
     groups to furtherance of the purposes of this Act; and
       (4) identify appropriate entities, such as a nonprofit 
     corporation, that could be established to assume the 
     responsibilities of the Commission following its termination.
       (d) Powers of the Commission.--In furtherance of the 
     purposes of this Act, the Commission is authorized to--
       (1) procure temporary and intermittent services to the same 
     extent that is authorized by section 3109(b) of title 5, 
     United States Code, but at rates determined by the Commission 
     to be reasonable;
       (2) accept the services of personnel detailed from the 
     State of Louisiana or any political subdivision thereof, and 
     may reimburse the State or political subdivision for such 
     services;
       (3) upon the request of the Commission, the head of any 
     Federal agency may detail, on a reimbursable basis, any of 
     the personnel of such agency to the Commission to assist the 
     Commission in carrying out its duties;
       (4) appoint and fix the compensation of such staff as may 
     be necessary to carry out its duties. Staff shall be 
     appointed subject to the provisions of title 5, United States 
     Code, governing appointments in the competitive service, and 
     shall be paid in accordance with the provisions of Chapter 51 
     and subchapter III of chapter 53 of such title relating to 
     classification and General Schedule pay rates;
       (5) enter into cooperative agreements and leases with 
     public or private individuals or entities for research, 
     historic preservation, and education purposes;
       (6) make grants to assist in the preparation of studies 
     that identify, preserve, and plan for the management of the 
     heritage area;
       (7) notwithstanding any other provision of law, seek and 
     accept donations of funds or services from individuals, 
     foundations, or other public or private entities and expend 
     the same for the purposes of providing services and programs 
     in furtherance of the purposes of this Act.
       (8) assist others in developing educational, informational, 
     and interpretive programs and facilities;
       (9) hold such hearings, sit and act at such times and 
     places, take such testimony, and receive such evidence, as 
     the Commission may consider appropriate; and
       (10) use the United States mails in the same manner and 
     under the same conditions as other departments or agencies of 
     the United States.
       (e) Compensation.--Members of the Commission shall receive 
     no compensation for their service on the Commission. While 
     away from their homes or regular places of business in the 
     performance of services for the Commission, members shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, in the same manner as persons employed 
     intermittently in the Government service are allowed expenses 
     under section 5703 of title 5, United States Code.
       (e) Chairman.--The Commission shall elect a chairman from 
     among its members. The term of the chairman shall be for 3 
     years.
       (f) Terms.--The terms of Commission members shall be for 3 
     years. Any member of the Commission appointed by the 
     Secretary for a 3-year-term may serve after expiration of his 
     or her term until a successor is appointed. Any vacancy shall 
     be filled in the same manner in which the original 
     appointment was made. Any member appointed to fill a vacancy 
     shall serve for the remainder of the term for which the 
     predecessor was appointed.
       (g) Annual Reports.--The Commission shall submit an annual 
     report to the Secretary identifying its expenses and any 
     income, the entities to which any grants or technical 
     assistance were made during the year for which the report is 
     made, and actions that are planned for the following year.

     SEC. 203. DUTIES OF THE HERITAGE AREA COMMISSION.

       (a) Preparation of Plan.--Within 3 years after the 
     Commission conducts its first meeting, it shall prepare and 
     submit a heritage area management plan to the Governor of the 
     State of Louisiana. The Governor shall, if the Governor 
     approves the plan, submit it to the Secretary for review and 
     approval. The Secretary shall provide technical assistance to 
     the Commission in the preparation and implementation of the 
     plan, in concern with actions by the National Park Service to 
     prepare a general management plan for the historical park. 
     The plan shall consider local government plans and shall 
     present a unified heritage preservation and education plan 
     for the heritage area. The plan shall include, but not be 
     limited to--
       (1) an inventory of important properties and cultural 
     landscapes that should be preserved, managed, developed, and 
     maintained because of their cultural, natural, and public use 
     significance;
       (2) an analysis of current land uses within the area and 
     how they affect the goals of preservation and public use of 
     the heritage area;
       (3) an interpretive plan to address the cultural and 
     natural history of the area, and actions to enhance visitor 
     use. This element of the plan shall be undertaken in 
     consultation with the National Park Service and visitor use 
     plans for the national historical park;
       (4) recommendations for coordinating actions by local, 
     state, and Federal governments within the heritage area, to 
     further the purposes of this Act; and
       (5) an implementation program for the plan including 
     desired actions by state and local governments and other 
     involved groups and entities.
       (b) Approval of the Plan.--The Secretary shall approve or 
     disapprove the plan within 90 days after receipt of the plan 
     from the Commission. The Commission shall notify the 
     Secretary of the status of approval by the Governor of 
     Louisiana when the plan is submitted for review and approval. 
     In determining whether or not to approve the plan the 
     Secretary shall consider--
       (1) whether the Commission has afforded adequate 
     opportunity, including public meetings and hearings, for 
     public and governmental involvement in the preparation of the 
     plan; and
       (2) whether reasonable assurances have been received from 
     the State and local governments that the plan is supported 
     and that the implementation program is feasible; and
       (c) Disapproval of the Plan.--If the Secretary disapproves 
     the plan, he shall advise the Commission in writing of the 
     reasons for disapproval, and shall provide recommendations 
     and assistance in the revision of the plan. Following 
     completion of any revisions to the plan, the Commission shall 
     resubmit the plan to the Governor of Louisiana for approval, 
     and to the Secretary, who shall approve or disapprove the 
     plan within 90 days after the date that the plan is revised.

     SEC. 204. TERMINATION OF HERITAGE AREA COMMISSION.

       (a) Termination.--The Commission shall terminate on the day 
     occurring 10 years after the first official meeting of the 
     Commission.
       (b) Extension.--The Commission may petition to be extended 
     for a period of not more than 5 years beginning on the day 
     referred to in subsection (a), provided the Commission 
     determines a critical need to fulfill the purposes of this 
     Act; and the Commission obtains approval from the Secretary, 
     in consultation with the Governor of Louisiana.
       (c) Heritage Area Management Following Termination of the 
     Commission.--The national heritage area status for the Cane 
     River region shall continue following the termination of the 
     Commission. The management plan, and partnerships and 
     agreements subject to the plan shall guide the future 
     management of the heritage area. The Commission, prior to its 
     termination, shall recommend to the Governor of the State of 
     Louisiana and the Secretary, appropriate entities, including 
     the potential for a corporation, to assume the 
     responsibilities of the Commission.

     SEC. 205. DUTIES OF OTHER FEDERAL AGENCIES.

       In general, any Federal entity conducting or supporting 
     activities directly affecting the heritage area, and any 
     entity of the State of Louisiana, or a political subdivision 
     thereof, acting pursuant to a grant of Federal funds or a 
     Federal permit or agreement directly affecting the heritage 
     area shall--
       (1) consult with the Secretary and the Commission with 
     respect to implementation of their proposed actions; and
       (2) to the maximum extent practicable, coordinate such 
     activities with the Commission to minimize potential impacts 
     on the resources of the heritage area.

     SEC. 206. AUTHORIZATION OF APPROPRIATIONS.

       Except as provided in subsection (b) there are authorized 
     to be appropriated such sums as may be necessary to carry out 
     this Act.
                                 ______

      By Mrs. KASSEBAUM (for herself, Mr. Metzenbaum, and Mr. Kennedy):
  S. 1981. A bill to amend the Federal Food, Drug, and Cosmetic Act, 
the Public Health Service Act, and the Orphan Drug Act to revise the 
provisions of such acts relating to orphan drugs, and for other 
purposes; to the Committee on Labor and Human Resources.


                   orphan drug act amendments of 1994

  Mrs. KASSEBAUM. Mr. President, I am introducing today, along with 
Senators Metzenbaum and Kennedy, the Orphan Drug Act Amendments of 
1994. This legislation would extend the authorization of the Orphan 
Drug Act for 3 years and would also make several refinements to it.
  For the past several years, efforts to reauthorize the act have been 
unsuccessful due to controversy over attempts which I and others have 
made to introduce greater competition in the orphan drug market. The 
legislation we are introducing today attempts to bridge the differences 
that have arisen in past debates. I am pleased to note that this 
proposal enjoys the support of the Biotechnology Industry Organization 
[BIO], as well as the National Organization for Rare Disorders [NORD].
  Briefly, the legislation addresses the question of competition in two 
ways. First, it changes from 7 to 4 years the period of market 
exclusively guaranteed to any approved orphan drug. Orphan drugs of 
``limited commercial potential,'' as defined by regulations to be 
issued by the Department of Health and Human Services, would qualify 
for an additional 3 years of exclusive marketing rights.
  Second, provisions are made to permit more than one company to put a 
particular orphan drug on the market in instances where both companies 
were working on the drug in roughly the same time-frame. These so-
called simultaneous development provisions are identical to those 
included in previous orphan drug legislation.
  These new provisions would not apply to orphan drugs which are 
currently on the market or ``in the pipeline.''
  Additional provisions of the bill would: (1) provide for the 
withdrawal of exclusive marketing rights if the patient population for 
the approved treatment exceeds 200,000; (2) extend the authorization of 
the research grant program; and (3) replace the existing Orphan 
Products Board with an Office for Orphan Diseases and Conditions.
  This legislation is the product of extensive discussions and 
negotiation and represents a genuine compromise among competing 
interests. As with any compromise, no party can claim total victory. 
Certainly, there are points of my original proposal which I would have 
liked to have retained. Nevertheless, I believe that the time, effort, 
and good faith brought to these discussions have produced a bill which 
both preserves the incentives of the act and better meets its original 
intent.
  I am proud to have been associated with the Orphan Drug Act since its 
inception over a decade ago. In nearly every respect, the act has been 
a success. To date, over 500 drugs have received orphan designation and 
approximately 100 of those have been approved for marketing. Approved 
drugs have included treatments for diseases or conditions such as 
blepharospasm, a condition which causes almost complete eye closure, 
and Paget's Disease, a bone disorder where normal bone formation is 
disrupted. In addition, the research grant program authorized by the 
act has supported over 200 grants to assist with clinical testing of 
drubs with potential for treating rare diseases or conditions.
  This reauthorization legislation will allow continued progress in 
bringing the hope of treatment to the millions of Americans who suffer 
from rare diseases and disorders. I hope it will be possible for the 
Senate to move promptly in advancing this legislation.
  Mr. President, I ask unanimous consent that the text of the bill and 
a summary of its provisions appear in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1981

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

     SECTION 1. SHORT TITLE AND REFERENCE.

       (a) Short Title.--This Act may be cited as the ``Orphan 
     Drug Act Amendments of 1994 ''.
       (b) Reference.--Whenever in this Act (other than sections 5 
     and 6) an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 201 et seq.).

     SEC. 2. PERIOD OF EXCLUSIVITY.

       (a) Initial Period.--Subsection (a) of section 527 (21 
     U.S.C. 360cc) is amended--
       (1) by inserting ``(1)'' after ``(a)'';
       (2) by redesignating paragraphs (1), (2), and (3) as 
     subparagraphs (A), (B), and (C), respectively;
       (3) by striking ``seven years'' and inserting ``4 years''; 
     and
       (4) by striking ``505(c)(2)'' and inserting 
     ``505(c)(1)(B)''.
       (b) Additional Period.--Subsection (a) of section 527 (21 
     U.S.C. 360cc) (as amended by subsection (a)) is amended by 
     adding at the end the following new paragraphs:
       ``(2) The holder of the approved application, 
     certification, or license of a drug to which the 4-year 
     period of exclusivity applies under paragraph (1) may, after 
     the expiration of 3\1/2\ years of such period but not later 
     than 90 days before the expiration of such period, apply to 
     the Secretary for a 3-year extension of such period. Such an 
     application shall contain such information as the Secretary 
     determines is necessary to evaluate such application.
       ``(3) The Secretary shall approve an application submitted 
     under paragraph (2) if the applicant--
       ``(A) demonstrates that the drug has a limited commercial 
     potential as determined under regulations of the Secretary, 
     taking into account sales information respecting such drug 
     and any other factor identified by the Secretary in such 
     regulations that is relevant to the commercial potential of 
     such drug, and
       ``(B) makes such demonstration on the basis of the 
     regulations of the Secretary referred to in subparagraph (A) 
     that were in effect--
       ``(i) on the date--
       ``(I) such drug received its designation under section 
     526(a), or
       ``(II) such applicant applied for an exemption for such 
     drug under section 505(i) or 507(d),
     whichever first occurs, or
       ``(ii) if the date under clause (i) occurred before the 
     date such regulations were in effect, on the date such 
     regulations were in effect.''.
       (c) Conforming Amendment.--Section 527(b) (21 U.S.C. 
     360cc(b)) is amended--
       (1) by striking ``during the seven-year period beginning on 
     the date of the application approval'' and inserting ``during 
     the applicable period of exclusivity under subsection (a)''; 
     and
       (2) by striking ``such seven year period'' and inserting 
     ``the applicable period of exclusivity under subsection 
     (a)''.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall not apply to a drug--
       (1) for which an application under section 505 or 507 of 
     the Federal Food, Drug, and Cosmetic Act or section 351 of 
     the Public Health Service Act was submitted before March 1, 
     1994; or
       (2) for which an exemption under section 505(i) or 507(d) 
     of the Federal Food, Drug, and Cosmetic Act was in effect 
     before March 1, 1994, for which human clinical trials were 
     actively being conducted before such date, and for which an 
     application for designation under section 526 of such Act was 
     submitted before the date of enactment of the Orphan Drug Act 
     Amendments of 1994.

     The 7 year period of exclusivity provided by section 527(a) 
     of the Federal Food, Drug, and Cosmetic Act before the date 
     of the enactment of this Act shall, after such date, apply to 
     a drug described in paragraph (1) or (2).
       (d) Regulations.--The Secretary shall issue final 
     regulations to implement paragraphs (2) and (3) of section 
     527(a) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
     360cc) (as amended by subsection (b)) not later than 6 months 
     after the date of the enactment of this Act.

     SEC. 3. DESIGNATIONS.

       (a) In General.--Section 526(a)(2) (21 U.S.C. 360bb(a)(2)) 
     is amended to read as follows:
       ``(2) For purposes of paragraph (1), the term `rare disease 
     or condition' means any disease or condition that--
       ``(A) affects fewer than 200,000 persons in the United 
     States determined on the basis of--
       ``(i) the facts and circumstances as of the date the 
     request for designation of the drug under this subsection is 
     made, and
       ``(ii) projections as to the number of persons who will be 
     affected by the disease or condition on a date which is 3 
     years from date such request was made, or
       ``(B) affects more than 200,000 persons in the United 
     States and for which there is no reasonable expectation that 
     the cost of developing and making available in the United 
     States a drug for such disease or condition will be recovered 
     from sales in the United States of such drug.''.
       (b) Exclusivity.--Section 527(b) (21 U.S.C. 360cc(b)) is 
     amended--
       (1) in paragraph (1), by striking ``or'' at the end of such 
     paragraph;
       (2) by striking the period at the end of paragraph (2) and 
     inserting ``; or'', and
       (3) by adding at the end the following new paragraph:
       ``(3) a drug has been designated under section 526 for a 
     rare disease or condition described in section 526(a)(2)(A) 
     and if after such designation it is determined that--
       ``(A) such disease or condition affects more than 200,000 
     persons in the United States; and
       ``(B) such drug does not meet the requirement of section 
     526(a)(2)(B).''.

     SEC. 4. SIMULTANEOUS DEVELOPMENT.

       (a) In General.--Section 527(b) (21 U.S.C. 360cc(b)), as 
     amended by section 3(b), is amended by--
       (1) inserting ``(1)'' after ``(b)'';
       (2) by redesignating paragraphs (1), (2), and (3) as 
     subparagraphs (A), (B), and (C), respectively;
       (3) by striking ``for a person who is not'' and inserting 
     ``for an applicant who is not''; and
       (4) by adding at the end the following new subparagraphs:
       ``(D) the Secretary finds, after providing the holder, such 
     applicant, and any other interested person an opportunity to 
     present their views, that the drugs of the holder and such 
     applicant were developed simultaneously.

     The Secretary shall make a decision on a request for a 
     finding under subparagraph (D) not later than 60 days after 
     the filing of the request.
       ``(2) For purposes of paragraph (1)(D), drugs of a holder 
     and an applicant shall be considered to be developed 
     simultaneously only if--
       ``(A) the applicant requested that its drug be designated 
     under section 526 not later than 6 months after publication 
     of the designation under section 526(c) of the holder's drug;
       ``(B) the applicant initiated the human clinical trials 
     that the applicant relied on in its application for such 
     approval, certification, or license not more than 12 months 
     after the date the holder initiated the human clinical trials 
     that the holder relied on in its application for such 
     approval, certification, or license; and
       ``(C) the applicant submitted such application, including 
     the reports of the clinical and animal studies necessary for 
     approval, certification, or licensing, not more than 12 
     months after the holder submitted its application, including 
     such reports, for such action.
       ``(3) Paragraph (1)(D) does not apply to a drug--
       ``(A) for which an application under section 505 or 507 or 
     section 351 of the Public Health Service Act was submitted 
     before March 1, 1994; or
       ``(B) for which an exemption under section 505(i) or 507(d) 
     was in effect before March 1, 1994, for which human clinical 
     trials were actively being conducted before such date, and 
     for which an application for designation under section 526 
     was submitted before the date of enactment of the Orphan Drug 
     Act Amendments of 1994.''.
       (b) Publication.--Section 526(c) (21 U.S.C. 360bb(c)) is 
     amended--
       (1) by inserting ``for a rare disease or condition'' after 
     ``(a)''; and
       (2) by striking ``shall be made available to the public'' 
     and inserting ``shall be promptly published in the Federal 
     Register and otherwise made available to the public in a 
     manner designed to notify persons who have such disease or 
     condition''.

     SEC. 5. OFFICE FOR ORPHAN DISEASES AND CONDITIONS.

       Section 227 of the Public Health Service Act (42 U.S.C. 
     236) is amended--
       (1) in subsection (a), to read as follows:
       ``(a) There is established in the Department of Health and 
     Human Services an Office for Orphan Diseases and Conditions. 
     Such Office shall be established at a level within the 
     Department with sufficient authority to assure full 
     implementation of the functions and responsibilities 
     established by this section.'';
       (2) by striking ``Board'' each place the term appears and 
     inserting ``Office'';
       (3) in subsection (b), by striking ``drugs and devices'' 
     and inserting ``drugs, devices, and medical foods'';
       (4) in subsection (c)(1)(A), by inserting ``of chapter V'' 
     after ``subchapter B'';
       (5) by adding at the end the following new subsection:
       ``(f)(1) There is established in the Office an advisory 
     committee to advise the Office in carrying out the functions 
     of the Office under this section.
       ``(2) The advisory committee shall be comprised of 11 
     members appointed by the Secretary, in consultation with the 
     Office and the Commissioner of the Food and Drug 
     Administration, from persons knowledgeable about rare 
     diseases and conditions, including--
       ``(A) 5 representatives of organizations of persons with 
     rare diseases or conditions;
       ``(B) 3 research scientists; and
       ``(C) 3 representatives of health-related companies.
       ``(3) The Secretary shall also appoint, as liaisons to the 
     advisory committee, individuals from the Food and Drug 
     Administration, the National Institutes of Health, and other 
     appropriate Federal agencies.
       ``(4) Vacancies occurring in the membership of the advisory 
     committee shall be filled in the same manner as the original 
     appointment for the position being vacated. Vacancies shall 
     not affect the power of the remaining members to execute the 
     duties of the advisory committee.
       ``(5) Members of the advisory committee, and liaisons to 
     the advisory committee, shall not be compensated, but shall 
     receive travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter 1 of chapter 57 of title 5, United States 
     Code, for each day the member or liaison is engaged in the 
     performance of duties away from the home or regular place of 
     business of the member or liaison.
       ``(6) Notwithstanding section 1342 of title 31, United 
     States Code, the advisory committee may accept the voluntary 
     services provided by a member of the advisory committee or a 
     liaison to the advisory committee.'', and
       (6) by amending the section heading to read as follows:


             ``office for orphan diseases and conditions''.

     SEC. 6. AUTHORIZATION FOR ORPHAN DRUG ACT.

       Section 5(c) of the Orphan Drug Act (21 U.S.C. 360ee(c)) is 
     amended by striking ``$10,000,000'' and all that follows and 
     inserting ``$20,000,000 for fiscal year 1995, $25,000,000 for 
     fiscal year 1996, and $30,000,000 for fiscal year 1997.''.
  Mr. METZENBAUM. Mr. President, today, Senator Nancy Kassebaum and I 
introduce S. 1981, the Orphan Drug Amendments of 1994. The bill is co-
sponsored by our colleague, the chairman of the Labor and Human 
Resources Committee, Senator Edward Kennedy. A companion bill is being 
introduced in the House of Representatives today by Health and 
Environment Subcommittee Chairman Henry Waxman.
  This legislation represents a rare legislative achievement in that it 
enjoys support from the national organization that represents the 
victims of rare diseases [NORD] and the national organization that 
represents the biotechnology industry, which produces many life-giving 
orphan drugs [BIO]. Consequently, the bill stands as a testament to the 
fact that Government, industry and consumer groups can work together to 
improve the lives of the American people.
  Today, thanks to the Orphan Drug Program, more than 100 orphan drugs 
are being sold for debilitating diseases, such as hemophilia B, Pagets 
disease and carnitine deficiency, and over 500 drugs are currently 
under development. The bill builds on this achievement and strengthens 
the program for both the victims of rare diseases and the biotechnology 
industry. It does so by correcting the most basic weaknesses in the 
Orphan Drug Program that prolong market exclusivity for drugs of 
significant commercial value. However, the bill does not diminish the 
incentives for developing a new orphan drug that have made the program 
a success.
  The two oversight hearings that I chaired on the Orphan Drug Program 
in 1992, convinced me that we risked undermining congressional and 
public support for the Orphan Drug Program unless we restored it to its 
original purpose. The program was intended to spur the development of 
drugs of little commercial potential that would not otherwise have been 
available for the victims of rare diseases. It did so through a 
Government grant of 7 years of market exclusivity.
  The bill we are introducing today will leave the Orphan Drug Program 
virtually unchanged for the vast majority of orphan drugs that are of 
limited commercial potential. However, for the handful of drugs that do 
not meet that definition, it will preserve essential incentives for 
bringing them to market while opening them up to price competition 
after 4 years. It will also allow two or more orphan drugs to share the 
market if they are approved by the Food and Drug Administration within 
a year of one another. This provision, called simultaneous development, 
was adopted by the Congress in 1990, but later vetoed by the President.
  Unlike the previous bill, these amendments do not rely on a statutory 
sales trigger to extend market exclusivity for drugs of limited 
commercial potential. Instead, the Food and Drug Administration is 
charged with developing regulations to assure that true orphan drugs 
receive 7 full years of market protection. In addition, under the 
amendments, orphan designation will be granted only to those drugs that 
have a projected patient population below 200,000. The amendments will 
apply to orphan drugs that were not yet undergoing human clinical 
trials as of March 1, 1994.
  Both the biotechnology industry and the victims of rare diseases 
agree that these are prudent changes to the Orphan Drug Program and 
support the bill's enactment.
  By now it is apparent to everyone concerned that the Orphan Drug 
Program is too important for the millions of Americans who suffer from 
rare disorders to allow a handful of weaknesses to undermine its 
success. Our bill will bring the program closer to its original 
mission, and will thereby make more live-saving and hope-giving orphan 
drugs available and affordable for Americans with rare diseases.
  I urge all of my colleagues to support the bill. I am confident that 
an orphan drug bill that is being supported by both the rare disease 
consumer groups and the biotechnology industry will receive swift 
approval by the Senate.
  Mr. KENNEDY. Mr. President, I join in sponsoring the Orphan Drug Act 
amendments of 1994. This legislation provides important and timely 
improvements to a law which has led to the development of vital new 
medicines for the treatment of rare diseases.
  It is widely agreed that the Orphan Drug Act, originally enacted in 
1983, has been a tremendous success. The purpose of the act was to 
create incentives for the development of drugs for diseases so rare 
that the drugs have little commercial value. Innovative companies, 
particularly biotechnology companies, need the market exclusivity 
offered by the Orphan Drug Act to develop drugs for such diseases, 
since patent protection may be unavailable for their products. There 
are 102 orphan drugs currently on the market, and over 500 under 
investigation.
  However, a handful of orphan drugs now on the market may reach $1 
billion in multiyear sales--a record reached by few drugs in history, 
much less drugs of supposedly limited commercial value.
  For several years, the perception that the Orphan Drug Act can be a 
shelter for high-priced drugs has fueled debate which threatened to 
undermine the strong support for the act by the public, industry, and 
Congress. Changes are needed to maintain the integrity of the act while 
assuring that its protections are not misused to produce unreasonable 
prices and profits.
  The legislation offered today resolves any uncertainties over the 
future of orphan drug development. It is a fair and reasonable 
compromise which continues generous economic incentives to develop 
treatments for rare diseases. It is the result of lengthy negotiations, 
and has the endorsement of patient organizations, such as the National 
Organization for Rare Disorders, and also of the Biotechnology Industry 
Organization, the trade association representing the biotechnology 
industry.
  Under the compromise put forward today, the changes in the length of 
market exclusivity for orphan drugs will apply prospectively. Any 
designated orphan drug already approved by the FDA or undergoing human 
clinical trials as of March 1, 1994, will be entitled to 7 years of 
exclusivity, as under current law.
  After March 1, 1994, all newly designated orphan drugs will continue 
to have a minimum of 4 years of market exclusivity. If a product is of 
limited commercial potential, as determined by criteria issued by the 
Secretary of Health and Human Services, the manufacturer will receive 
an additional 3 years of market exclusivity. This compromise assures 
investors in the especially high-risk biotechnology industry that 
reasonable returns will still be possible during guaranteed periods of 
exclusivity. At the same time, it allows competition to develop in 
cases where drugs prove to have high commercial value.
  The legislation also provides that if two or more companies develop 
an orphan drug during the same time period, both may be given market 
exclusivity. Under this so-called simultaneous development provision, 
the drugs must be designated as orphan drugs within 6 months of each 
other, and human clinical trials must be initiated within 12 months of 
each other. This provision will assure flexibility when companies 
expend extensive resources and learn that their drug is being developed 
simultaneously with a competitor.
  Our hope is that this auspicious compromise will put the past 
controversy behind us, and launch a new era of orphan drug development 
by the biotechnology industry for the treatment of rare diseases.
  I especially commend my colleagues, Senator Metzenbaum and Senator 
Kassebaum, who have worked tirelessly on this issue for many years. I 
also commend the industry and patient organizations for working to 
achieve this hopeful compromise. I am pleased that Congressman Henry 
Waxman and Congressman Gerry Studds are introducing a companion bill in 
the House of Representatives.
  I urge all Senators to join in supporting this legislation. I am 
hopeful that we can expedite our consideration in Congress, so that it 
can be signed into law by President Clinton this year.
                                 ______

      By Mr. ROTH (for himself and Mr. Cohen):
  S. 1982. A bill to modernize and streamline Federal acquisition 
management and procedures, and for other purposes; to the Committee on 
Governmental Affairs.


             federal acquisition management improvement act

 Mr. ROTH. Mr. President, this year Congress has a real 
opportunity to reform the federal buying system. There is broad, bi-
partisan consensus on the need to fix the federal buying system. The 
administration is supportive and has been working with the Senate to 
develop legislation.
  Mr. President, the Federal buying system needs an overhaul. Multi-
billion dollar cost overruns; programs that are years or even a decade 
behind schedule; incentives that encourage spending rather than 
savings; and top-heavy bureaucratic agencies that rely on detailed 
regulations rather than good judgment; these are the features that come 
to mind when one thinks of the Federal Government's buying system. The 
GAO stated in its 1993 High Risk Reports that the Federal buying system 
itself perpetuates fraud, waste, and abuse. They also reported that 
cost increases on the order of 20 to 40 percent are common on major 
programs, with numerous programs experiencing much greater cost 
overruns.
  The problems arise because the buying system provides the wrong 
incentives and is administered by top-heavy bureaucratic agencies that 
rely on a complicated web of regulations. I asked the General 
Accounting Office to give me a report on its recent investigations of 
procurement horror stories. The GAO found it had produced more than 150 
such reports and testimonies over the last 5 years. These include such 
findings as the $1 billion cost increase that resulted from budget 
instability and technical management problems in the Army's Javelin 
anti-tank missile. In another audit, the GAO identified NASA contract 
management actions that caused a weather satellite to fall 3 years 
behind schedule while cost doubled to $1.7 billion. The GAO report 
identified problems in the way agencies determine their needs; poorly 
administered contracts; cost, schedule, and performance problems; 
funding and budgeting problems; and weaknesses in the acquisition 
workforce. The GAO report underscores the need for comprehensive 
reform.
  According to the Congressional Budget Office, in fiscal year 1994, 
the Federal Government will buy about $450 billion of goods and 
services. With this much money at stake, Congress has a responsibility 
to ensure that the taxpayer's money is spent well. Some claim that 
waiving contracting laws for commercial items and small purchases would 
be the best that Congress can provide. But, the GAO testified last week 
that this would address only a small percent of the dollars spent on 
Federal purchases of goods and services. Such marginal changes are 
inadequate. A July 1993 Defense Science Board found that: ``without 
fundamental reform, DOD will be unable to afford the weapons, 
equipment, and services it needs to provide for our national 
security.'' It behooves Congress to be bolder and to enact such 
reforms.

  I have worked for more than a decade to reform the government's 
buying system, and over the years my conclusion has not changed: 
without major cultural and structural reform, Americans won't get the 
results they deserve. First, agencies rely on a maze of regulations and 
bureaucratic organizations to prevent horror stories. That approach is 
expensive, prolonged, and, as the GAO report illustrates, often 
ineffective. Second, the incentives are wrong. Program managers and 
contractors are rewarded for increasing the size of their program and 
their budget. There are no incentives for a job well done, but there 
are penalties for taking risks that may save money.
  If we can fix the buying system, billions of dollars will be saved. 
The National Performance Review identified potential savings of $22.5 
billion. Last summer's Defense Science Board Study on Acquisition 
Reform identified $20 billion in potential annual savings for just the 
Defense Department.
  Last fall, Senator Cohen and I introduced a bill to fix the Defense 
Department's buying system. And, quite frankly, I think such 
comprehensive reforms need to be applied across the Federal buying 
system if we are to fix its chronic problems. I was pleased that the 
witnesses at all of the recent hearings on procurement have supported 
including our proposals in the Senate bill.
  Today, we are introducing a governmentwide procurement reform bill to 
overhaul the Federal buying system. Our proposal contains six parts and 
incorporates the principles of unity of command, lean management 
structure, fast processes, and pay for performance for both Government 
workers and contractors, First, the bill establishes performance goals. 
On average, programs should be within 90 percent of their schedule 
goals and budgets. In addition, the bill requires DOD to reduce by 50 
percent the time it takes to field emerging technologies.
  Second, the bill directs Federal agencies to streamline their 
acquisition management processes for products developed for the 
Government. It requires that the revised processes focus on results and 
that programs be fully funded for each phase of development.
  Third, it streamlines bureaucracies by directing agencies to get rid 
of non-value-added layers of headquarters management and consolidate 
where practicable. In non-Defense agencies, Inspectors General will 
make streamlining recommendations. In DOD, the bill contains 
recommendations for consolidating headquarters management and 
reorienting the organization to be responsive to the needs of 
combatants. Across government, the proposal increases the authority of 
users to ensure that purchases will fulfill needs, It also returns day-
to-day program management authority to program managers.
  Fourth, the bill re-emphasizes the commitment of Congress to a 
professional acquisition work-force and establishes the incentive 
structure towards program performance. It directs Departments and 
agencies to develop incentive structures, including pay for 
performance, tied to program performance rather than to the size of a 
manager's budget.
  Fifth, the legislation reverses the preference for buying government-
unique items. It requires use of commercial items, unless it is shown 
that they do not meet actual government needs.
  Sixth, the bill implements pay for performance for contractors, 
including use of contractor's performance in decisions for future work, 
tieing profits to results instead of costs, and tieing progress 
payments to achievement of measurable results. The Government will be 
able to manage its contractors on the basis of how well they perform. 
The Defense Inspector General testified last week in support of tieing 
progress payments to results. The Director of the Office of Federal 
Procurement Policy, as well as several other witnesses from government 
and industry, testified in support of tieing contract award to past 
performance and the bill sets forth a structure effectively 
implementing this concept.
  Mr. President, large savings can be realized from the comprehensive 
reforms we are proposing. I anticipate that my approach will reduce 
acquisition management personnel by as much as 25 to 30 percent through 
reductions in duplicative headquarters staffs. The Defense Science 
Board Task Force on Defense Acquisition Reform in July of 1993 reported 
that a comprehensive reform along the lines we are proposing would save 
$20 billion per year.
  In summary, there is both a need and an opportunity for reforming 
Defense acquisition. But, Mr. President, I must point out that 
bureaucracies are inherently unable to reform themselves. The time has 
come for Congress to make some very difficult decisions which have far-
reaching impact on the future of our country.
  I remain convinced that in order to achieve meaningful acquisition 
reform we must go well beyond simply streamlining the process of 
awarding contracts. Instead, we must provide for the major cultural and 
structural reform across the Federal buying system. The Federal 
Acquisition Streamlining Act provides a positive first step towards 
reform, but it needs additional provisions that address the underlying 
systemic problems. It is our intent to offer the bill we are 
introducing today as an amendment to Senator Glenn's Federal 
Acquisition Streamlining Act during the Committee markup.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1982

       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 ``Federal Acquisition 
     Management Improvement Act of 1994''.

     SEC. 2. TABLE OF CONTENTS.

       The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

                 TITLE I--ACQUISITION IMPROVEMENT GOALS

Sec. 101. Reduction in Federal Government procurement costs.
Sec. 102. Armed services acquisitions.
Sec. 103. Civilian agency acquisitions.

               TITLE II--ACQUISITION MANAGEMENT POLICIES

                Subtitle A--Armed Services Acquisitions

Sec. 201. Implementation of defense acquisition workforce amendments.
Sec. 202. Enhanced encouragement of excellence in the defense 
              acquisition workforce.
Sec. 203. Program management stability.

                Subtitle B--Civilian Agency Acquisitions

Sec. 211. Policy regarding training of Federal acquisition workforce.
Sec. 212. Acquisition workforce management system.
Sec. 213. Enhanced encouragement of excellence in the Federal 
              acquisition workforce.
Sec. 214. Inapplicability to Department of Defense.

           TITLE III--ORGANIZATION OF THE ACQUISITION PROCESS

                Subtitle A--Armed Services Procurements

Sec. 301. Reorganization of acquisition authority.
Sec. 302. Phase funding and review of defense acquisition programs.

                Subtitle B--Civilian Agency Acquisitions

Sec. 311. Customer-driven acquisitions.
Sec. 312. Review of agency organization for acquisitions.
Sec. 313. Acquisition of noncommercial items.
Sec. 314. Inapplicability to Department of Defense.

                      TITLE IV--CONTRACT FORMATION

                Subtitle A--Specifications and Standards

Sec. 401. Preference for commercial items.

               Subtitle B--Performance-Based Contracting

Sec. 411. Use of incentive contracts.
Sec. 412. Guidance regarding consideration of past contract performance 
              of offerors.

           TITLE V--PERFORMANCE-BASED CONTRACT ADMINISTRATION

Sec. 501. Contract financing in armed services acquisitions.
Sec. 502. Contract financing in civilian agency acquisitions.

                  TITLE VI--DAVIS-BACON ACT EXEMPTION

Sec. 601. Contracts not in excess of $500,000.

             TITLE VII--MISCELLANEOUS CONFORMING AMENDMENTS

Sec. 701. Modification of the responsibility of the Comptroller of the 
              Department of Defense for defense acquisition budgets.
Sec. 702. The defense acquisition work force.
Sec. 703. Procurement procedures generally.
Sec. 704. Research and development.
Sec. 705. Miscellaneous procurement provisions.
Sec. 706. Major defense acquisition programs.
Sec. 707. Service specific acquisition authority.
Sec. 708. Other laws.

                       TITLE VIII--EFFECTIVE DATE

Sec. 801. Effective date.
                 TITLE I--ACQUISITION IMPROVEMENT GOALS

     SEC. 101. REDUCTION IN FEDERAL GOVERNMENT PROCUREMENT COSTS.

       (a) Policy.--It is the policy of Congress that, by the end 
     of fiscal year 1999, there should be achieved Federal budget 
     savings in procurement costs of the Federal Government 
     (including the personnel and other overhead costs associated 
     with procurements for the Federal Government) in a total 
     amount of at least the $22,500,000,000 that is projected for 
     savings from Federal procurement streamlining in the report 
     on the National Performance Review carried out during 1993 
     under the direction of the Vice President.
       (b) Annual Progress Report.--The Director of the Office of 
     Management and Budget shall transmit to Congress each year, 
     at the same time that the President submits the budget to 
     Congress pursuant to section 1105 of title 31, United States 
     Code, an assessment of the progress made in implementing the 
     policy set out in subsection (a).

     SEC. 102. ARMED SERVICES ACQUISITIONS.

       (a) Acquisition Performance Goals.--Section 2301 of title 
     10, United States Code, is amended by adding at the end the 
     following new subsection:
       ``(e)(1) It is the policy of Congress that, on and after 
     January 1, 2000--
       ``(A) the Department of Defense should achieve, on average, 
     90 percent of the cost and schedule goals established for the 
     research and development programs and acquisition programs of 
     the Department of Defense; and
       ``(B) the average period necessary for converting an 
     emerging technology into initial operational capability for 
     the Department of Defense should not exceed 8 years.
       ``(2) Whenever it is necessary in order to implement the 
     policy set out in paragraph (1), the Secretary of Defense 
     should--
       ``(A) identify and consider for termination research and 
     development programs and acquisition programs of the 
     Department of Defense that are not achieving the cost, 
     performance, and schedule goals of the programs taking into 
     consideration--
       ``(i) the needs of the Department known as of the time of 
     the consideration of such programs for termination;
       ``(ii) the state of the technology or technologies relevant 
     to the programs and to the needs of the Department;
       ``(iii) the estimated costs and projected schedules 
     necessary for the completion of such programs; and
       ``(iv) other pertinent information; and
       ``(B) identify existing and potential research and 
     development programs and acquisition programs that are 
     suitable alternatives for programs considered for termination 
     pursuant to subparagraph (A).''.
       (b) Responsibility for Departmental Oversight of 
     Acquisition Program Goals.--
       (1) In general.--Chapter 131 of title 10, United States 
     Code, is amended by adding at the end the following new 
     section:

     ``Sec. 2219. Responsibility for departmental oversight of 
       cost, performance, and schedule goals of acquisition 
       programs

       ``(a) Cost Goals.--The Comptroller of the Department of 
     Defense shall evaluate the cost goals proposed for each phase 
     of an acquisition program of the Department of Defense.
       ``(b) Performance and Schedule Goals.--The Joint Chiefs of 
     Staff shall approve or define the performance and schedule 
     goals for acquisition programs of the Department of Defense. 
     The Joint Chiefs of Staff shall approve the performance goals 
     for acquisition programs on the basis of cost, schedule, 
     performance, and risk.
       ``(c) Annual Reporting Requirement.--The Secretary of 
     Defense shall include in the annual report submitted to 
     Congress pursuant to section 113(c) of this title--
       ``(1) an assessment of the progress made in implementing 
     the policies set out in section 2301(e)(1) of this title; and
       ``(2) any actions taken or considered in accordance with 
     section 2301(e)(2) of this title.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of chapter 131 of title 10, United States Code, is 
     amended by adding at the end the following new item:

``2219. Responsibility for departmental oversight of cost, performance, 
              and schedule goals of acquisition programs.''.

     SEC. 103. CIVILIAN AGENCY ACQUISITIONS.

       (a) Acquisition Performance Goals.--
       (1) In general.--It is the policy of Congress that, on and 
     after January 1, 2000, each department and agency of the 
     Federal Government should achieve, on average, 90 percent of 
     the cost and schedule goals established for the research and 
     development programs and acquisition programs of that 
     department or agency.
       (2) Nonduplication of goal statement.--Paragraph (1) does 
     not apply to the Department of Defense. For the statement of 
     the corresponding goal for the Department of Defense see 
     subsection (e)(1)(A) of section 2301 of title 10, United 
     States Code, as added by section 102(a).
       (b) Responsibility for Agency Oversight of Acquisition 
     Program Cost Goals.--The Office of Federal Procurement Policy 
     Act (41 U.S.C. 401 et seq.) is amended by adding at the end 
     the following new section:


        ``agency oversight of cost goals of acquisition programs

       ``Sec. 29. The chief financial officer of an executive 
     agency shall evaluate the cost goals proposed for each phase 
     of an acquisition program of the agency.''.
       (c) Responsibility for Agency Oversight of Acquisition 
     Program Performance and Schedule Goals.--Section 303A of the 
     Federal Property and Administrative Services Act of 1949 (41 
     U.S.C. 253a) is amended by adding at the end the following 
     new subsection:
       ``(c) The head of an executive agency shall approve or 
     define the performance and schedule goals for acquisition 
     programs of that agency. The agency head shall approve the 
     performance goals for acquisition programs on the basis of 
     cost, schedule, performance, and risk.''.
               TITLE II--ACQUISITION MANAGEMENT POLICIES
                Subtitle A--Armed Services Acquisitions

     SEC. 201. IMPLEMENTATION OF DEFENSE ACQUISITION WORKFORCE 
                   AMENDMENTS.

       The Congress--
       (1) urges the Secretary of Defense to expedite the 
     implementation of the provisions of chapter 87 of title 10, 
     United States Code, relating to the acquisition workforce of 
     the Department of Defense; and
       (2) reemphasizes the importance of ensuring that the 
     acquisition workforce is educated and trained in accordance 
     with the standards set out in the provisions of such chapter.

     SEC. 202. ENHANCED ENCOURAGEMENT OF EXCELLENCE IN THE DEFENSE 
                   ACQUISITION WORKFORCE.

       (a) Enhanced System of Incentives and Adverse Actions.--
       (1) Review and action required.--The Secretary of Defense 
     shall review the incentives and personnel actions available 
     to the Secretary for encouraging excellence in the 
     acquisition workforce of the Department of Defense and, to 
     the maximum extent practicable, provide an enhanced system of 
     incentives for the encouragement of excellence in such 
     workforce.
       (2) Required consideration.--The Secretary shall 
     specifically consider whether action should be taken under 
     section 1736 of title 10, United States Code (as added by 
     subsection (b)), in the case of acquisition program executive 
     officers and acquisition program managers.
       (3) Regulations.--The Secretary shall prescribe in 
     regulations a system of incentives for encouraging 
     professional excellence among the functional analysts in the 
     defense acquisition workforce.
       (b) Enhanced Grades of Certain Acquisition Managers.--
       (1) In general.--Subchapter III of chapter 87 of title 10, 
     United States Code, is amended--
       (A) by redesignating sections 1736 and 1737 as sections 
     1737 and 1738, respectively; and
       (B) by inserting after section 1735 the following new 
     section 1736:

     ``Sec. 1736. Grade of certain acquisition managers

       ``(a) Program Executive Officer.--(1)(A) Subject to 
     subparagraph (B), the position of acquisition program 
     executive officer carries the grade of brigadier general, 
     rear admiral (lower half), major general, or rear admiral, as 
     the Secretary of Defense determines appropriate.
       ``(B) The President may designate a position of acquisition 
     program executive officer as a position of importance and 
     responsibility to carry the grade of lieutenant general or 
     vice admiral under section 601(a) of this title.
       ``(C) The President or the Secretary of Defense may 
     designate a position of acquisition program executive officer 
     to carry a grade above brigadier general or rear admiral 
     (lower half) only when the President or Secretary, as the 
     case may be, determines that the member serving in that 
     position has performed the duties of the position of an 
     acquisition program executive officer with distinction.
       ``(2) Notwithstanding any other provision of law (other 
     than a provision of law limiting the number of positions or 
     personnel in a certain grade), the Secretary of Defense may 
     fix the civilian grade of a position of acquisition program 
     executive officer at a civilian equivalent of a grade 
     referred to in paragraph (1). The Secretary shall fix the 
     civilian grade for the position of a particular employee at a 
     grade above the civilian equivalent of brigadier general or 
     rear admiral (lower half) only if the Secretary determines 
     that the employee serving in that position has performed the 
     duties of the position of an acquisition program executive 
     officer with distinction.
       ``(b) Acquisition Program Manager.--(1)(A) The position of 
     acquisition program manager carries the grade of colonel, 
     brigadier general, or major general, or, in the case of the 
     Navy, captain, rear admiral (lower half), or rear admiral, as 
     the Secretary of Defense determines appropriate.
       ``(B) The Secretary of Defense may designate a position of 
     acquisition program manager to carry a grade above colonel or 
     (in the case of the Navy) captain only when the Secretary 
     determines that the member serving in that position has 
     performed the duties of the position of an acquisition 
     program manager with distinction.
       ``(2) Notwithstanding any other provision of law (other 
     than a provision of law limiting the number of positions or 
     personnel in a certain grade), the Secretary of Defense may 
     fix the civilian grade of the position of civilian 
     acquisition program manager at a civilian equivalent of a 
     grade referred to in paragraph (1). The Secretary shall fix 
     the civilian grade for the position of a particular employee 
     at a grade above the civilian equivalent of colonel or (in 
     the case of the Navy) captain only if the Secretary 
     determines that the employee serving in that position has 
     performed the duties of the position of an acquisition 
     program executive officer with distinction.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of such subchapter is amended by striking out the 
     items relating to sections 1736 and 1737 and inserting in 
     lieu thereof the following:

``1736. Grade of certain acquisition managers.
``1737. Applicability.
``1738. Definitions and general provisions.''.
       (c) Pay for Performance in Acquisition Positions.--
       (1) In general.--Subchapter II of chapter 87 of title 10, 
     United States Code, is amended--
       (A) by redesignating sections 1725 as 1726; and
       (B) by inserting after section 1724 the following new 
     section 1725:

     ``Sec. 1725. Pay for performance

       ``(a) Pay Rates.--(1) The Secretary of Defense may provide 
     for the pay rate of an employee in an acquisition position 
     within the Department of Defense to be based, to an 
     appropriate extent, on specific criteria that relates the pay 
     rate of such employee to the employee's contribution to the 
     achievement of the policy goals set forth in section 
     2301(e)(1) of this title and performance goals approved or 
     defined in accordance with section 2219(b) of this title.
       ``(2) A pay rate established pursuant to paragraph (1) for 
     an employee in a position referred to in that subsection may 
     not exceed the lesser of--
       ``(A) the amount equal to 130 percent of the maximum pay 
     rate prescribed under law (other than paragraph (1)) for the 
     grade or other pay level of that position; or
       ``(B) the rate of basic pay payable for level V of the 
     Executive Schedule.
       ``(b) Relationship of Personnel Budget to Achievement of 
     Goals.--The Secretary of Defense, in approving or formulating 
     the personnel budget of a military department or Defense 
     Agency for a fiscal year, shall consider whether increased 
     funding is appropriate on the basis of the achievement by the 
     military department or Defense Agency of the schedule, 
     performance, and cost goals for acquisition programs of the 
     Department of Defense referred to in section 2301(e)(1) of 
     this title.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of such subchapter is amended by striking out the 
     item relating to section 1725 and inserting in lieu thereof 
     the following:

``1725. Pay for performance.
``1726. Office of Personnel Management approval.''.

     SEC. 203. PROGRAM MANAGEMENT STABILITY.

       (a) Assignment Period for Program Managers.--Section 1734 
     of title 10, United States Code, is amended--
       (1) in subsection (b)--
       (A) in paragraph (1)--
       (i) by striking out ``the major milestone'' in subparagraph 
     (A) and all that follows through the semicolon in such 
     subparagraph and inserting in lieu thereof ``a phase in the 
     acquisition program cycle;''; and
       (ii) by striking out the second sentence and inserting in 
     lieu thereof the following:
     ``Except as provided in subsection (c), a person in the 
     position of program manager or deputy program manager may not 
     be reassigned from such position before completion of a phase 
     in the acquisition program cycle.''; and
       (B) in paragraph (2)--
       (i) in the first sentence, by striking out ``the first 
     major milestone'' and all that follows in the first sentence 
     and inserting in lieu thereof ``a phase of the acquisition 
     program cycle.''; and
       (ii) in the second sentence, by striking out ``Secretary 
     concerned under subsection (d)'' and inserting in lieu 
     thereof ``Secretary of Defense under subsection (c)''; and
       (2) by striking out subsection (c).
       (b) Waiver Authority.--Such section is further amended by 
     striking out subsection (d) and inserting in lieu thereof the 
     following:
       ``(c) Waiver of Assignment Period.--(1) With respect to a 
     person assigned to a critical acquisition position, the 
     Secretary of Defense may waive the prohibition on 
     reassignment of that person (in subsection (a)(1) or (b)(1)) 
     and the service obligation in an agreement executed by that 
     person (under subsection (a)(2) or (b)(2)), but only in 
     exceptional circumstances (specified in regulations 
     prescribed by the Secretary) in which a waiver is necessary.
       ``(2) The Director of Acquisition Education, Training, and 
     Career Development shall maintain a written record of the 
     rationale for each waiver granted under this subsection.''.
       (c) Conforming Amendments and Definition.--Such section is 
     further amended--
       (1) by redesignating subsection (e) as subsection (d); 
     and--
       (A) in paragraph (1) of such subsection, by striking out 
     ``a program manager, after completion of a major program 
     milestone, whichever is longer'' in the first sentence and 
     inserting in lieu thereof ``a program manager or deputy 
     program manager, after completion of a phase of the 
     acquisition program cycle''; and
       (B) in paragraph (2) of such subsection, by striking out 
     ``of the department concerned'' in the first sentence;
       (2) by redesignating subsection (f) as subsection (e); and
       (3) by striking out subsections (g) and (h) and inserting 
     in lieu thereof the following:
       ``(f) In this section, the term `phase of an acquisition 
     program cycle' shall have the meaning given such term in the 
     regulations prescribed pursuant to section 2220 of this 
     title.''.
                Subtitle B--Civilian Agency Acquisitions

     SEC. 211. POLICY REGARDING TRAINING OF FEDERAL ACQUISITION 
                   WORKFORCE.

       The head of each department or agency of the Federal 
     Government should ensure that the acquisition workforce of 
     the department or agency is trained to perform effectively 
     and efficiently the acquisition functions of the Federal 
     Government.

     SEC. 212. ACQUISITION WORKFORCE MANAGEMENT SYSTEM.

       (a) Requirement for System.--The head of each department or 
     agency in the executive branch shall, on an expedited basis, 
     establish policies and procedures for the effective 
     management (including accession, education, training, and 
     career development) of persons serving in acquisition 
     positions in the department or agency.
       (b) Similarity to Defense Acquisition Workforce System.--To 
     the maximum extent practicable, the department or agency head 
     shall replicate within the department or agency the 
     acquisition workforce policies and procedures that are set 
     forth in and implemented under the provisions of chapter 87 
     of title 10, United States Code, relating to the acquisition 
     workforce of the Department of Defense.
       (c) Authority.--The head of a department or agency referred 
     to in subsection (a) may exercise the same authority with 
     respect to the acquisition workforce of that department or 
     agency as the Secretary of Defense or any other official 
     within the Department of Defense may exercise with respect to 
     the defense acquisition workforce under the provisions of 
     chapter 87 of title 10, United States Code.
       (d) Nonduplication of Requirements and Authority.--This 
     section does not apply to the Department of Defense.

     SEC. 213. ENHANCED ENCOURAGEMENT OF EXCELLENCE IN THE FEDERAL 
                   ACQUISITION WORKFORCE.

       (a) Enhanced System of Incentives and Adverse Actions.--The 
     head of each department or agency in the executive branch 
     shall review the incentives and personnel actions available 
     to such official for encouraging excellence in the 
     acquisition workforce of that department or agency and, to 
     the maximum extent practicable, provide an enhanced system of 
     incentives for the encouragement of excellence in such 
     workforce. The enhanced system shall--
       (1) in accordance with applicable law, relate pay to 
     performance; and
       (2) provide for consideration of the extent to which the 
     performance of personnel in such workforce contributes to the 
     achievement of cost goals, schedule goals, and performance 
     goals established for acquisition programs of the department 
     or agency.
       (b) Increased Grades for Certain Acquisition Managers.--
       (1) Consideration required.--The head of each department or 
     agency in the executive branch shall specifically consider 
     whether the grade of the position of any acquisition program 
     manager should be increased.
       (2) Applicable criteria and limits.--In carrying out 
     paragraph (1), the department or agency head shall apply the 
     same criteria and limits as apply to civilian personnel of 
     the defense acquisition workforce under section 1736 of title 
     10, United States Code (as added by section 202(b)).
       (c) Incentives for Technical Specialists.--The head of each 
     department or agency in the executive branch shall prescribe 
     in regulations a system of incentives for encouraging 
     professional excellence among the technical specialists in 
     that department or agency who support acquisitions of the 
     department or agency.

     SEC. 214. INAPPLICABILITY TO DEPARTMENT OF DEFENSE.

       This subtitle does not apply to the Department of Defense.
           TITLE III--ORGANIZATION OF THE ACQUISITION PROCESS
                Subtitle A--Armed Services Procurements

     SEC. 301. REORGANIZATION OF ACQUISITION AUTHORITY.

       (a) Under Secretary of Defense for Acquisition.--Section 
     133(b) of title 10, United States Code, is amended--
       (1) by redesignating paragraphs (3) and (4) as paragraphs 
     (4) and (5), respectively; and
       (2) by striking out paragraphs (1) and (2) and inserting in 
     lieu thereof the following:
       ``(1) prescribing policies for research, development, and 
     acquisition activities of the Department of Defense;
       ``(2) planning, programming, and overseeing the research, 
     development, and acquisition activities of the Department of 
     Defense;
       ``(3) assisting in the preparation and integration of 
     budgets for the research, development, and acquisition 
     activities of the Department of Defense, including assisting 
     in the planning, programming, and budgeting system with 
     respect to such activities;''.
       (b) Defense Research, Development, and Acquisition 
     Agency.--
       (1) Establishment.--Part I of subtitle A of title 10, 
     United States Code, is amended by inserting after chapter 9 
     the following new chapter:

  ``CHAPTER 10--DEFENSE RESEARCH, DEVELOPMENT, AND ACQUISITION AGENCY

``Sec.
``231. Establishment.
``232. Use of agency for all research, development, and acquisition 
              activities.
``233. Duties.
``234. Program executive officers.
``235. Program managers.
``236. Functional analytical capability.

     ``Sec.  231. Establishment

       ``(a) Agency.--There is established a Defense Research, 
     Development, and Acquisition Agency in the Department of 
     Defense.
       ``(b) Director.--(1) The head of the agency is the Director 
     of Defense Research, Development, and Acquisition who shall 
     be appointed by the Under Secretary of Defense for 
     Acquisition from among persons who are career professional 
     employees in the acquisition workforce of any Federal agency.
       ``(2) A member of the armed forces, while serving as the 
     Director, holds the grade of general or, in the case of an 
     officer of the Navy, admiral. A civilian, while serving as 
     the Director, holds an equivalent civilian grade.
       ``(c) Chief of Engineering and Analysis.--(1) In the 
     Defense Research, Development, and Acquisition Agency there 
     is a Chief of Engineering and Analysis who shall be appointed 
     by the Director from among the career professional employees 
     in the acquisition workforce of the Department of Defense.
       ``(2) The Director shall evaluate the performance of the 
     Chief of Engineering and Analysis. The Director may not 
     delegate the performance of the evaluation responsibility.
       ``(3) The Chief of Engineering and Analysis shall be the 
     senior technical adviser for the Defense Research, 
     Development, and Acquisition Agency.

     ``Sec.  232. Use of agency for all research, development, and 
       acquisition activities

       ``Subject to sections 3013(h), 5013(h), 8013(h) of this 
     title, the Director shall conduct the research, development, 
     and acquisition activities of the Department of Defense, 
     including the activities of the research, development, and 
     engineering centers of the Department of Defense.

     ``Sec.  233. Duties

       ``The responsibilities of the Under Secretary of Defense 
     for Acquisition that are to be performed by the Defense 
     Research, Development, and Acquisition Agency include the 
     following:
       ``(1) Planning, programming, and carrying out the research, 
     development, and acquisition activities of the Department of 
     Defense.
       ``(2) Advising the Secretary of Defense and the Secretaries 
     of the military departments regarding the preparation and 
     integration of the budgets for the research, development, and 
     acquisition activities of the Department of Defense.
       ``(3) Identifying and informing operational commanders 
     regarding alternative technology solutions to fulfill 
     emerging requirements.
       ``(4) Ensuring that the acquisition plan for each 
     acquisition program realistically reflects the budget and 
     related decisions made for that program.
       ``(5) Conducting research on management techniques as well 
     as on individual systems.

     ``Sec. 234. Program executive officers

       ``(a) Selection and Evaluation.--The program executive 
     officers of the Defense Research, Development, and 
     Acquisition Agency shall be selected and evaluated by the 
     Director.
       ``(b) Duties.--The duties of a program executive officer 
     are as follows:
       ``(1) To manage acquisition programs assigned to the 
     program executive officer.
       ``(2) To manage related technical support resources.
       ``(3) To establish and conduct integrated decision team 
     meetings.
       ``(4) To provide technological advice (including advice 
     regarding costs, schedule, and performance data relating to 
     alternative technological approaches for fulfilling emerging 
     requirements) to users of program products and to the 
     officials within the Department of Defense who plan, program, 
     and budget for the acquisition programs assigned to the 
     program executive officer.
       ``(c) Organization of Personnel.--The program executive 
     officers shall be organized on the basis of unique mission 
     areas or, in the case of programs for systems specifically 
     relating to certain classes of targets, on the basis of 
     target classes. No program executive officer may be organized 
     with other program executive officers on both bases. The 
     Secretary of Defense shall identify the mission areas or 
     target classes on the basis of which program executive 
     officers may be organized.
       ``(d) Acquisition Life-Cycle Management.--The 
     responsibilities of a program executive officer for a weapon 
     acquisition program shall cover the entire life cycle of the 
     program.
       ``(e) User and Operator Interaction.--(1) The Chairman of 
     the Joint Chiefs of Staff, in consultation with the Under 
     Secretary of Defense for Acquisition, shall prescribe 
     policies and procedures for the interaction of the commanders 
     of the unified and specified combatant commands with program 
     executive officers regarding the initiation and conduct of 
     weapon acquisition programs. The policies and procedures 
     shall include provisions for enabling such commands to 
     perform operational and acceptance testing of weapons 
     acquired pursuant to such programs.
       ``(2) The Comptroller of the Department of Defense, in 
     consultation with the Under Secretary of Defense for 
     Acquisition and the Secretaries of the military departments, 
     shall prescribe policies and procedures for the interaction 
     between the commanders of the unified and specified combatant 
     commands and the program executive officers regarding funding 
     for weapon acquisition programs.

     ``Sec.  235. Program managers

       ``(a) Selection and Evaluation.--Each program manager of 
     the Defense Research, Development, and Acquisition Agency 
     shall be selected and evaluated by the Director and a program 
     executive officer and shall report directly to the program 
     executive officer having primary responsibility for the 
     system being acquired under the program.
       ``(b) Duties.--A program manager is responsible for the 
     routine management of a research, development, and 
     acquisition program, including the obtaining of necessary 
     logistical support and support services for that program.
       ``(c) Relationship to Program Executive Officers.--The 
     management functions of a program manager should not 
     duplicate the management functions of a program executive 
     officer.

     ``Sec.  236. Functional analytical capability

       ``(a) Responsibility of Chief of Engineering and 
     Analysis.--The Chief of Engineering and Analysis shall be 
     responsible for ensuring that each of the functional 
     analytical capabilities provided to the Director, acquisition 
     program executive officers, and acquisition program managers 
     in connection with acquisition programs of the Department of 
     Defense is the most advanced capability of its type.
       ``(b) Functional Analytical Capabilities.--The functional 
     analytical capabilities referred to in subsection (a) are as 
     follows:
       ``(1) Cost and affordability analysis.
       ``(2) Logistics and support analysis.
       ``(3) Reliability and maintainability analysis.
       ``(4) Producibility analysis.
       ``(5) Environmental analysis.
       ``(6) Configuration management.
       ``(7) Warfighting and battlefield performance and utility 
     analysis.
       ``(8) System engineering.
       ``(9) Any other analytical capability that may be necessary 
     for ensuring the timeliness, performance, and affordability 
     of acquisition programs.''.
       (2) Clerical amendment.--The tables of chapters at the 
     beginning of subtitle A of title 10, United States Code, and 
     at the beginning of part I of such subtitle, are amended by 
     inserting after the item relating to chapter 9 the following 
     new item:

``10. Defense Research, Development, and Acquisition Agency..231''.....

       (c) Limitation of Procurement Authority of Military 
     Departments.--
       (1) Army.--Section 3013 of title 10, United States Code, is 
     amended--
       (A) in subsection (b)--
       (i) by striking out ``and subject to the provisions of 
     chapter 6'' and inserting in lieu thereof ``, subject to the 
     provisions of chapter 6, and subject to subsection (h),''; 
     and
       (ii) in paragraph (4), by striking out ``(including 
     research and development)''; and
       (B) by adding at the end the following new subsection:
       ``(h)(1) The Secretary of the Army shall be responsible for 
     procurements of property and services, and may exercise 
     authority to conduct such procurements, only to the extent 
     that the Secretary of Defense determines necessary for the 
     sustainment of operations of the Army. The Secretary of 
     Defense shall prescribe in regulations the extent of the 
     responsibility and authority of the Secretary of the Army for 
     procurements of property and services.
       ``(2) In conducting a procurement in accordance with 
     paragraph (1), the Secretary of the Army shall be subject to 
     the same laws as are applicable to acquisitions conducted by 
     the Secretary of Defense.''.
       (2) Navy.--Section 5013 of title 10, United States Code, is 
     amended--
       (A) in subsection (b)--
       (i) by striking out ``and subject to the provisions of 
     chapter 6'' and inserting in lieu thereof ``, subject to the 
     provisions of chapter 6, and subject to subsection (h),''; 
     and
       (ii) in paragraph (4), by striking out ``(including 
     research and development)''; and
       (B) by adding at the end the following new subsection:
       ``(h)(1) The Secretary of the Navy shall be responsible for 
     procurements of property and services, and may exercise 
     authority to conduct such procurements, only to the extent 
     that the Secretary of Defense determines necessary for the 
     sustainment of operations of the Navy. The Secretary of 
     Defense shall prescribe in regulations the extent of the 
     responsibility and authority of the Secretary of the Navy for 
     procurements of property and services.
       ``(2) In conducting a procurement in accordance with 
     paragraph (1), the Secretary of the Navy shall be subject to 
     the same laws as are applicable to acquisitions conducted by 
     the Secretary of Defense.''.
       (3) Air force.--Section 8013 of title 10, United States 
     Code, is amended--
       (A) in subsection (b)--
       (i) by striking out ``and subject to the provisions of 
     chapter 6'' and inserting in lieu thereof ``, subject to the 
     provisions of chapter 6, and subject to subsection (h),''; 
     and
       (ii) in paragraph (4), by striking out ``(including 
     research and development)''; and
       (B) by adding at the end the following new subsection:
       ``(h)(1) The Secretary of the Air Force shall be 
     responsible for procurements of property and services, and 
     may exercise authority to conduct such procurements, only to 
     the extent that the Secretary of Defense determines necessary 
     for the sustainment of operations of the Air Force. The 
     Secretary of Defense shall prescribe in regulations the 
     extent of the responsibility and authority of the Secretary 
     of the Air Force for procurements of property and services.
       ``(2) In conducting a procurement in accordance with 
     paragraph (1), the Secretary of the Air Force shall be 
     subject to the same laws as are applicable to acquisitions 
     conducted by the Secretary of Defense.''.
       (4) Section 2302(1) of title 10, United States Code, is 
     amended by striking out ``the Secretary of the Army, the 
     Secretary of the Navy, the Secretary of the Air Force,''.
       (d) Transfer of Functions.--
       (1) Military departments.--Except as provided in paragraph 
     (3), all research, development, and acquisition functions of 
     the Secretaries of the military departments are transferred 
     to the Secretary of Defense.
       (2) Procurement agencies, commands, and offices.--Except as 
     provided in paragraph (3), there is transferred to the 
     Defense Research, Development, and Acquisition Agency 
     referred to in section 231(a) of title 10, United States Code 
     (as added by subsection (b)), all functions of the following 
     organizations:
       (A) The Defense Logistics Agency.
       (B) The Advanced Research Projects Agency.
       (C) The following procurement commands of the Army:
       (i) The Army Materiel Command.
       (ii) The Army Information Systems Command.
       (iii) The Army Strategic Defense Command.
       (D) The following procurement commands of the Navy and 
     Marine Corps:
       (i) The Navy weapons systems commands.
       (ii) The Navy Strategic Systems Program Office.
       (iii) The Marine Corps Research, Development and 
     Acquisition Command.
       (E) The Air Force Materiel Command.
       (F) Any successor organization to any agency, command, or 
     office named in subparagraphs (A) through (E).
       (G) Each agency or command within the Department of Defense 
     not referred to in subparagraphs (A) through (F) that, on the 
     day before the effective date of this section, has as a 
     primary mission or function the performance of a research, 
     development, or acquisition function of the Department of 
     Defense.
       (3) Exceptions to transfer requirement.--
       (A) In general.--The following functions of the Secretaries 
     of the military departments are not transferred to the 
     Secretary of Defense:
       (i) Functions that relate to planning, programming, and 
     budgeting.
       (ii) Functions to be performed by the Secretary of a 
     military department pursuant to section 3013(h), 5013(h), or 
     8013(h) of title 10, United States Code, as added by 
     subsection (c).
       (B) Discretionary exception.--To the extent prescribed by 
     the Secretary of Defense, functions referred to in 
     subparagraph (A)(ii) that are performed by an organization 
     referred to in paragraph (2) need not be transferred in 
     accordance with that paragraph.
       (4) Termination of organization.--The Secretary of Defense 
     shall terminate each organization from which all of its 
     functions are transferred in accordance with this subsection.
       (e) Savings Provisions.--
       (1) Regulations, instruments, rights, and privileges.--All 
     rules, regulations, contracts, orders, determinations, 
     permits, certificates, licenses, grants, and privileges--
       (A) which have been issued, made, granted, or allowed to 
     become effective by the Secretary or other officer or 
     employee of a military department, the head of a Defense 
     Agency of the Department of Defense, or by a court of 
     competent jurisdiction, in connection with any research, 
     development, or acquisition activity of a military department 
     or Defense Agency, and
       (B) which are in effect on the effective date of this 
     section,
     shall continue in effect according to their terms until 
     modified, terminated, superseded, set aside, or revoked in 
     accordance with law by the Secretary of Defense, the Under 
     Secretary of Defense for Acquisition, or another authorized 
     official, by a court of competent jurisdiction, or by 
     operation of law.
       (2) Proceedings.--
       (A) Proceedings not affected.--The provisions of this 
     section shall not affect any proceeding, including any 
     proceeding involving a claim or application, in connection 
     with any acquisition activity of a military department or a 
     Defense Agency of the Department of Defense that is pending 
     before that military department or Defense Agency on the 
     effective date of this section.
       (B) Orders.--Orders may be issued in any such proceeding, 
     appeals may be taken therefrom, and payments may be made 
     pursuant to such orders, as if this section had not been 
     enacted. An order issued in any such proceeding shall 
     continue in effect until modified, terminated, superseded, or 
     revoked by the Secretary of Defense or the Under Secretary of 
     Defense for Acquisition, by a court of competent 
     jurisdiction, or by operation of law.
       (C) Rule of construction.--Nothing in this paragraph 
     prohibits the discontinuance or modification of any such 
     proceeding under the same terms and conditions and to the 
     same extent that such proceeding could have been discontinued 
     or modified if this section had not been enacted.
       (3) Regulations.--The Secretary of Defense may prescribe 
     regulations providing for the orderly transfer of proceedings 
     continued under paragraph (2) to the Secretary of Defense or 
     to the Under Secretary of Defense for Acquisition.

     SEC. 302. PHASE FUNDING AND REVIEW OF DEFENSE ACQUISITION 
                   PROGRAMS.

       (a) In General.--Chapter 131 of title 10, United States 
     Code, as amended by section 102(b), is further amended by 
     adding at the end the following new sections:

     ``Sec. 2220. Results oriented acquisition program cycle

       ``The Secretary of Defense shall define in regulations a 
     simplified acquisition program cycle that is results-oriented 
     and consists of the following phases:
       ``(1) The integrated decision team meeting which--
       ``(A) may be requested by a potential user of the system or 
     component to be acquired, the head of a laboratory, or a 
     program office on such bases as the emergence of a new 
     military requirement, cost savings opportunity, or new 
     technology opportunity;
       ``(B) shall be conducted by a program executive officer; 
     and
       ``(C) shall usually be completed within 1 to 3 months.
       ``(2) The prototype development and testing phase which--
       ``(A) shall include operational tests and concerns relating 
     to manufacturing operations and life cycle support;
       ``(B) shall usually be completed within 6 to 36 months; and
       ``(C) shall produce sufficient numbers of prototypes to 
     assess operational utility.
       ``(3) Product integration, development, and testing which--
       ``(A) includes full-scale development, operational testing, 
     and integration of components; and
       ``(B) shall usually be completed within 1 to 5 years.
       ``(4) Production, integration into existing systems, or 
     production and integration into existing systems.

     ``Sec. 2221. Funding for results oriented acquisition program 
       cycle

       ``(a) Program Phase Details To Be Submitted to Congress.--
     Before initial funding is made available for a phase of the 
     acquisition program cycle of an acquisition program which 
     requires congressional authorization of appropriations, the 
     Secretary of Defense shall submit to Congress information 
     about the objectives and plans for the conduct of that phase 
     and the funding requirements for the entire phase. The 
     Secretary shall include in such information objective, 
     quantifiable criteria for assessing the extent to which the 
     stated objectives and goals are achieved.
       ``(b) Full Phase Funding.--(1) In authorizing 
     appropriations for an acquisition program that requires 
     congressional authorization, Congress shall provide in an Act 
     authorizing appropriations for the Department of Defense an 
     authorization of appropriations for a phase of the 
     acquisition program in a single amount that is sufficient for 
     carrying out that phase. Such an authorization of 
     appropriations shall be stated in the Act as a specific item.
       ``(2) In each Act making appropriations for the Department 
     of Defense Congress shall specify the phase of each such 
     acquisition program of the department for which an 
     appropriation is made and the amount of the appropriation for 
     the phase of that program.

     ``Sec. 2222. Major program decision

       ``(a) Single Major Decision Point.--The acquisition program 
     approval process within the Department of Defense shall have 
     one major decision point which shall occur for an acquisition 
     program before that program proceeds into product integration 
     and development.
       ``(b) Determinations at Decision Point.--At the major 
     decision point for an acquisition program, the Under 
     Secretary of Defense for Acquisition in consultation with the 
     Vice Chairman Joint Chief of Staff shall--
       ``(1) review the program;
       ``(2) determine whether the program should continue to be 
     carried out beyond product integration and development; and
       ``(3) decide whether--
       ``(A) to commit to further development;
       ``(B) to require further prototyping; or
       ``(C) to terminate the program.
       ``(c) Considerations.--In the review of an acquisition 
     program, the Under Secretary shall consider the potential 
     benefits, affordability, needs, and risks of the program.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 131 of title 10, United States Code, as 
     amended by section 102(b), is further amended by adding at 
     the end the following new items:

``2220. Results oriented acquisition program cycle.
``2221. Funding for results oriented acquisition program cycle.
``2222. Major program decision.''.
                Subtitle B--Civilian Agency Acquisitions

     SEC. 311. CUSTOMER-DRIVEN ACQUISITIONS.

       It is the policy of Congress that--
       (1) the purpose for initiating, planning, and executing 
     acquisitions of property or services by the Federal 
     Government be to satisfy the needs of the potential users of 
     such property or services; and
       (2) potential users of the property or services be involved 
     to a significant extent in the initiation, planning, and 
     execution of the acquisitions of such property or services by 
     the Federal Government.

     SEC. 312. REVIEW OF AGENCY ORGANIZATION FOR ACQUISITIONS.

       (a) Inspector General Review of Management Structure.--Not 
     later than 18 months after the date of the enactment of this 
     Act, the Inspector General of each department or agency of 
     the executive branch shall--
       (1) review the acquisition process in the department or 
     agency in order to identify each, if any, management 
     organization or position involved in the process that does 
     not contribute to--
       (A) the efficiency of the acquisition process; or
       (B) the quality and cost-effectiveness of items acquired; 
     and
       (2) submit to Congress a report containing--
       (A) the findings of the Inspector General that result from 
     the review; and
       (B) any recommendations for reorganizing the acquisition 
     management structure of the department or agency to ensure 
     that each organization and position involved in the 
     management of acquisitions is valuable to the acquisition 
     process because of contributions to the process as described 
     in paragraph (1).
       (b) Agencies Without Inspectors General.--In the case of a 
     department or agency that does not have an Inspector General, 
     the head of the department or agency shall carry out the 
     review, and submit the report, required by subsection (a)(2).

     SEC. 313. ACQUISITION OF NONCOMMERCIAL ITEMS.

       (a) Results-Oriented Process Required.--The head of each 
     department or agency of the executive branch shall develop 
     and implement a results-oriented acquisition process for 
     acquisitions of property and services by the department or 
     agency. The process shall include the identification of 
     quantitative measures and standards for determining the 
     extent to which an acquisition of noncommercial items by the 
     department or agency satisfies the needs for which the items 
     are being acquired.
       (b) Definitions.--In this section:
       (1) Noncommercial item.--The term ``noncommercial item'' 
     means an item that is not a commercial item.
       (2) Commercial item.--The term ``commercial item'' means--
       (A) property, other than real property, that is of a type 
     regularly used by the general public or by nongovernmental 
     entities in the course of normal business operations for 
     purposes other than governmental purposes and--
       (i) has been sold or licensed to the general public;
       (ii) has not been sold or licensed to the general public 
     but has been offered for sale or license to the general 
     public; or
       (iii) is not yet available in the commercial marketplace 
     but will be made available for commercial delivery within a 
     reasonable period;
       (B) any item that, but for minor modifications made to meet 
     Federal Government requirements or modifications of a type 
     customarily available in the commercial marketplace, would 
     satisfy the criteria in subparagraph (A);
       (C) any combination of items meeting the requirements of 
     subparagraph (A) or (B) that are of a type customarily 
     combined and sold in combination to the general public; and
       (D) installation services, maintenance services, repair 
     services, training services, and other services if such 
     services are procured for support of an item referred to in 
     subparagraph (A), (B), or (C) and if the source of such 
     services--
       (i) offers such services to the general public and the 
     Federal Government contemporaneously and under similar terms 
     and conditions; and
       (ii) offers to use the same work force for providing the 
     Federal Government with such services as the source uses for 
     providing such services to the general public.

     SEC. 314. INAPPLICABILITY TO DEPARTMENT OF DEFENSE.

       This subtitle does not apply to the Department of Defense.
                      TITLE IV--CONTRACT FORMATION
                Subtitle A--Specifications and Standards

     SEC. 401. PREFERENCE FOR COMMERCIAL ITEMS.

       (a) Armed Services Acquisitions.--Section 2305(a)(1)(C) of 
     title 10, United States Code, is amended in the second 
     sentence by striking out ``Subject to such needs, 
     specifications may'' and inserting in lieu thereof the 
     following: ``Normally, the specifications shall be the 
     specifications of commercial items. When such items cannot 
     meet bona fide needs of the Department of Defense, 
     specifications shall''.
       (b) Civilian Agency Acquisitions.--Section 303A(a)(3) of 
     the Federal Property and Administrative Services Act of 1949 
     (41 U.S.C. 253a(a)(3)) is amended in the second sentence by 
     striking out ``Subject to such needs, specifications may'' 
     and inserting in lieu thereof the following: ``Normally, the 
     specifications shall be the specifications of commercial 
     items. When such items cannot meet bona fide needs of the 
     executive agency, specifications shall''.
               Subtitle B--Performance-Based Contracting

     SEC. 411. USE OF INCENTIVE CONTRACTS.

       (a) Armed Services Acquisitions.--Subsection (c) of section 
     2306 of title 10, United States Code, is amended to read as 
     follows:
       ``(c) The program executive officer of an acquisition 
     program may determine the type of contract to be used when 
     entering into a contract under the program. The program 
     executive officer shall use an incentive type contract unless 
     the program executive officer determines that such a contract 
     would inhibit achievement of acquisition performance 
     goals.''.
       (b) Civilian Agency Acquisitions.--Section 304(b) of the 
     Federal Property and Administrative Services Act of 1949 (41 
     U.S.C. 254(b)) is amended by striking out the second sentence 
     and inserting in lieu thereof the following: ``The program 
     manager of an acquisition program may determine the type of 
     contract to be used when entering into a contract under the 
     program. The program manager shall use an incentive type 
     contract unless the program manager determines that such a 
     contract would inhibit achievement of acquisition performance 
     goals.''.

     SEC. 412. GUIDANCE REGARDING CONSIDERATION OF PAST CONTRACT 
                   PERFORMANCE OF OFFERORS.

       Section 6 of the Office of Federal Procurement Policy (41 
     U.S.C. 405) is amended by adding at the end the following:
       ``(j)(1) Congress makes the following findings:
       ``(A) Past contract performance of an offeror is one of the 
     relevant factors that contracting officials of executive 
     agencies should consider in entering into contracts.
       ``(B) It is appropriate for a contracting official to 
     consider past contract performance of an offeror as an 
     indicator of the likelihood that the offeror will 
     successfully perform a contract to be entered into by that 
     official.
       ``(2) The Administrator shall prescribe for executive 
     agencies guidance regarding consideration of the past 
     contract performance of offerors in awarding contracts. The 
     guidance shall include--
       ``(A) standards for evaluating past performance that 
     facilitate consistent and fair evaluation by all executive 
     agencies;
       ``(B) policies for the collection and maintenance of 
     information on past contract performance that, to the maximum 
     extent practicable, facilitate automated collection, 
     maintenance, and dissemination of information and provide for 
     ease of collection, maintenance, and dissemination of 
     information by other methods, as necessary; and
       ``(C) policies for ensuring that offerors are afforded an 
     opportunity to submit information on past contract 
     performance and that information submitted by offerors is 
     considered.
       ``(3) The Administrator shall prescribe for all executive 
     agencies the policy regarding the period for which 
     information on past performance of offerors may be maintained 
     and considered.
       ``(4) In the case of an offeror regarding whom there is no 
     information on past contract performance or regarding whom 
     information on past contract performance is not available, 
     the offeror may not be evaluated favorably or unfavorably on 
     the factor of past contract performance.
       ``(5) In evaluating past contract performance of an offeror 
     under the guidance prescribed pursuant to paragraph (1), the 
     head of an executive agency shall consider the performance of 
     the offeror with respect to cost, schedule, and compliance 
     with technical or functional specifications.''.
           TITLE V--PERFORMANCE-BASED CONTRACT ADMINISTRATION

     SEC. 501. CONTRACT FINANCING IN ARMED SERVICES ACQUISITIONS.

       (a) Reorganization of Principal Authority Provision.--
     Section 2307 of title 10, United States Code, is amended--
       (1) by striking out the section heading and inserting in 
     lieu thereof the following:

     ``Sec. 2307. Contract financing'';

       (2) by striking out ``(a) The head of an agency'' and 
     inserting in lieu thereof ``(b) Payment Authority.--The head 
     of an agency'';
       (3) by striking out ``(b) Payments'' and inserting in lieu 
     thereof ``(d) Payment Amount.--Payments'';
       (4) by striking out ``(c) Advance payments'' and inserting 
     in lieu thereof ``(e) Security for Advance Payments.--Advance 
     payments'';
       (5) by striking out ``(d)(1) The Secretary of Defense'' and 
     inserting in lieu thereof ``(f) Conditions for Progress 
     Payments.--(1) The Secretary of Defense''; and
       (6) by striking out ``(e)(1) In any case'' and inserting in 
     lieu thereof ``(g) Action in Case of Fraud.--(1) In any 
     case''.
       (b) Financing Policy.--Such section, as amended by 
     subsection (a), is further amended by inserting after the 
     section heading the following new subsection (a):
       ``(a) Policy.--Payments authorized under this section and 
     made for financing purposes should be made periodically and 
     in a timely manner to facilitate contract performance while 
     protecting the security interests of the Government. 
     Government financing shall be provided only to the extent 
     necessary to ensure prompt and efficient performance and only 
     after the availability of private financing is considered. A 
     contractor's use of funds received as contract financing and 
     the contractor's financial condition shall be monitored. If 
     the contractor is a small business concern, special attention 
     shall be given to meeting the contractor's financial need.''.
       (c) Pay for Performance.--Such section, as amended by 
     subsection (a), is further amended by inserting after 
     subsection (b) the following new subsection (c):
       ``(c) Payments under subsection (b) may be made on any of 
     the following bases:
       ``(1) Performance measured by objective, quantifiable 
     methods such as receipt of items by the Federal Government, 
     work measurement, or statistical process controls.
       ``(2) Accomplishment of events defined in the program 
     management plan.
       ``(3) Other quantifiable measures of results.''.
       (d) Terminology Correction.--Such section, as amended by 
     subsection (a)(2), is further amended in subsection (b)(2) by 
     striking out ``bid''.
       (e) Effective Date of Lien Related to Advance Payments.--
     Such section, as amended by subsection (a)(4), is further 
     amended in subsection (e) by inserting before the period at 
     the end of the third sentence the following: ``and is 
     effective immediately upon the first advancement of funds 
     without filing, notice, or any other action by the United 
     States''.
       (f) Conditions for Progress Payments.--Such section, as 
     amended by subsection (a)(5), is further amended in 
     subsection (f)--
       (1) in the first sentence of paragraph (1), by striking out 
     ``work, which'' and all that follows through the period at 
     the end of such sentence and inserting in lieu thereof ``work 
     accomplished that meets standards established under the 
     contract. The determination of the extent of the work 
     accomplished may be measured on a basis set forth in 
     subsection (c).''; and
       (2) by striking out paragraph (3) and inserting in lieu 
     thereof the following:
       ``(3) This subsection applies to a contract for an amount 
     equal to or greater than the simplified acquisition 
     threshold.''.
       (g) Conforming and Clerical Amendments.--
       (1) Cross reference.--Such section, as amended by 
     subsection (a), is further amended in subsections (d) and (e) 
     by striking out ``subsection (a)'' and inserting in lieu 
     thereof ``subsection (b)''.
       (2) Table of contents.--The table of sections at the 
     beginning of chapter 137 of title 10, United States Code, is 
     amended by striking out the item relating to section 2307 and 
     inserting in lieu thereof the following:

``2307. Contract financing.''.

     SEC. 502. CONTRACT FINANCING IN CIVILIAN AGENCY ACQUISITIONS.

       (a) Reorganization of Principal Authority Provision.--
     Section 305 of the Federal Property and Administrative 
     Services Act of 1949 (41 U.S.C. 255) is amended--
       (1) by striking out the section heading and inserting in 
     lieu thereof the following:


                        ``contract financing'';

       (2) by striking out ``(a) Any executive agency'' and 
     inserting in lieu thereof ``(b) Payment Authority.--Any 
     executive agency'';
       (3) by striking out ``(b) Payments'' and inserting in lieu 
     thereof ``(d) Payment Amount.--Payments''; and
       (4) by striking out ``(c) Advance payments'' and inserting 
     in lieu thereof ``(e) Security for Advance Payments.--Advance 
     payments''.
       (b) Financing Policy.--Such section, as amended by 
     subsection (a), is further amended by inserting after the 
     section heading the following new subsection (a):
       ``(a) Policy.--Payments authorized under this section and 
     made for financing purposes should be made periodically and 
     in a timely manner to facilitate contract performance while 
     protecting the security interests of the Government. 
     Government financing shall be provided only to the extent 
     necessary to ensure prompt and efficient performance and only 
     after the availability of private financing is considered. A 
     contractor's use of funds received as contract financing and 
     the contractor's financial condition shall be monitored. If 
     the contractor is a small business concern, special attention 
     shall be given to meeting the contractor's financial need.''.
       (c) Pay for Performance.--Such section, as amended by 
     subsection (a), is further amended by inserting after 
     subsection (b) the following new subsection (c):
       ``(c) Payments under subsection (b) may be made on any of 
     the following bases:
       ``(1) Performance measured by objective, quantifiable 
     methods such as receipt of items by the Federal Government, 
     work measurement, or statistical process controls.
       ``(2) Accomplishment of events defined in the program 
     management plan.
       ``(3) Other quantifiable measures of results.''.
       (d) Terminology Correction.--Such section, as amended by 
     subsection (a)(2), is further amended in subsection (b)(2) by 
     striking out ``bid''.
       (e) Effective Date of Lien Related to Advance Payments.--
     Such section, as amended by subsection (a)(4), is further 
     amended in subsection (e) by inserting before the period at 
     the end of the third sentence the following: ``and is 
     effective immediately upon the first advancement of funds 
     without filing, notice, or any other action by the United 
     States''.
       (f) Revision of Civilian Agency Provision To Ensure Uniform 
     Requirements for Progress Payments.--
       (1) In general.--Such section, as amended by subsection 
     (a), is further amended by adding at the end the following:
       ``(f) Conditions for Progress Payments.--(1) The agency 
     head shall ensure that any payment for work in progress 
     (including materials, labor, and other items) under a 
     contract of an executive agency that provides for such 
     payments is commensurate with the work accomplished that 
     meets standards established under the contract. The 
     contractor shall provide such information and evidence as the 
     agency head determines necessary to permit the agency head to 
     carry out the preceding sentence.
       ``(2) The agency head shall ensure that progress payments 
     referred to in paragraph (1) are not made for more than 80 
     percent of the work accomplished under the contract so long 
     as the agency head has not made the contractual terms, 
     specifications, and price definite.
       ``(3) This subsection applies to a contract for an amount 
     equal to or greater than the simplified acquisition 
     threshold.
       ``(g) Action in Case of Fraud.--(1) In any case in which 
     the remedy coordination official of an executive agency finds 
     that there is substantial evidence that the request of a 
     contractor for advance, partial, or progress payment under a 
     contract awarded by that executive agency is based on fraud, 
     the remedy coordination official shall recommend that the 
     agency head reduce or suspend further payments to such 
     contractor.
       ``(2) An agency head receiving a recommendation under 
     paragraph (1) in the case of a contractor's request for 
     payment under a contract shall determine whether there is 
     substantial evidence that the request is based on fraud. Upon 
     making such a determination, the agency head may reduce or 
     suspend further payments to the contractor under such 
     contract.
       ``(3) The extent of any reduction or suspension of payments 
     by an agency head under paragraph (2) on the basis of fraud 
     shall be reasonably commensurate with the anticipated loss to 
     the United States resulting from the fraud.
       ``(4) A written justification for each decision of the 
     agency head whether to reduce or suspend payments under 
     paragraph (2), and for each recommendation received by the 
     agency head in connection with such decision, shall be 
     prepared and be retained in the files of the executive 
     agency.
       ``(5) Each agency head shall prescribe procedures to ensure 
     that, before the agency head decides to reduce or suspend 
     payments in the case of a contractor under paragraph (2), the 
     contractor is afforded notice of the proposed reduction or 
     suspension and an opportunity to submit matters to the head 
     of the agency in response to such proposed reduction or 
     suspension.
       ``(6) Not later than 180 days after the date on which an 
     agency head reduces or suspends payments to a contractor 
     under paragraph (2), the remedy coordination official of the 
     executive agency shall--
       ``(A) review the determination of fraud on which the 
     reduction or suspension is based; and
       ``(B) transmit a recommendation to the agency head whether 
     the suspension or reduction should continue.
       ``(7) Each agency head who receives recommendations made by 
     a remedy coordination official of the executive agency to 
     reduce or suspend payments under paragraph (2) during a 
     fiscal year shall prepare for such year a report that 
     contains the recommendations, the actions taken on the 
     recommendations and the reasons for such actions, and an 
     assessment of the effects of such actions on the Federal 
     Government. Any such report shall be available to any Member 
     of Congress upon request.
       ``(8) An agency head may not delegate responsibilities 
     under this subsection to any person in a position below level 
     IV of the Executive Schedule.
       ``(9) In this subsection, the term `remedy coordination 
     official', with respect to an executive agency, means the 
     person or entity in that executive agency who coordinates 
     within that executive agency the administration of criminal, 
     civil, administrative, and contractual remedies resulting 
     from investigations of fraud or corruption related to 
     procurement activities.''.
       (2) Relationship to prompt payment requirements.--The 
     amendments made by paragraph (1) are not intended to impair 
     or modify procedures required by the provisions of chapter 39 
     of title 31, United States Code, and the regulations issued 
     pursuant to such provisions of law, that relate to progress 
     payment requests, as such procedures are in effect on the 
     effective date of this Act.
       (g) Conforming and Clerical Amendments.--
       (1) Reference.--Section 305 of the Federal Property and 
     Administrative Services Act of 1949, as amended by subsection 
     (a), is further amended in subsections (c) and (d) by 
     striking out ``subsection (a)'' and inserting in lieu thereof 
     ``subsection (b)''.
       (2) Table of contents.--The table of contents in the first 
     section of such Act is amended by striking out the item 
     relating to section 305 and inserting in lieu thereof the 
     following:

``Sec. 305. Contract financing.''.
                  TITLE VI--DAVIS-BACON ACT EXEMPTION

     SEC. 601. CONTRACTS NOT IN EXCESS OF $500,000.

       (a) In General.--The first section of the Act of March 3, 
     1931 (40 U.S.C. 276a), commonly referred to as the ``Davis-
     Bacon Act'', is amended in subsection (a) by striking out 
     ``$2,000'' and inserting in lieu thereof ``$500,000''.
       (b) Related Regulations.--Section 2 of the Act of June 13, 
     1934 (40 U.S.C. 276c) is amended by inserting after 
     ``engaged'' the following: ``under contracts in excess of 
     $500,000''.
             TITLE VII--MISCELLANEOUS CONFORMING AMENDMENTS

     SEC. 701. MODIFICATION OF THE RESPONSIBILITY OF THE 
                   COMPTROLLER OF THE DEPARTMENT OF DEFENSE FOR 
                   DEFENSE ACQUISITION BUDGETS.

       Section 137(c) of title 10, United States Code, is amended 
     in each of paragraphs (2), (3), and (4), by inserting after 
     the paragraph designation the following: ``subject to section 
     133(b) of this title,''.

     SEC. 702. THE DEFENSE ACQUISITION WORK FORCE.

       (a) General Authorities and Responsibilities.--(1)(A) 
     Sections 1704, 1705, and 1707 of title 10, United States 
     Code, are repealed.
       (B) The table of sections at the beginning of subchapter I 
     of chapter 87 of such title is amended by striking out the 
     items relating to sections 1704 through 1707 and inserting in 
     lieu thereof the following:

``1704. Acquisition career program boards.''.
       (2) Section 1706 of title 10, United States Code, is 
     amended--
       (A) in the section heading by striking out ``Sec. 1706'' 
     and inserting in lieu thereof ``Sec. 1704'';
       (B) by striking out subsection (a) and inserting in lieu 
     thereof the following:
       ``(a) Establishment.--The Under Secretary of Defense for 
     Acquisition shall establish an acquisition career program 
     board to advise the Under Secretary in managing the 
     accession, training, education, and career development of 
     military and civilian personnel in the acquisition workforce 
     and in selecting individuals for the Acquisition Corps under 
     section 1731 of this title.'';
       (C) in subsection (b)--
       (i) in the first sentence, by striking out ``Each'' and 
     inserting in lieu thereof ``The''; and
       (ii) in the second sentence, by striking out ``service 
     acquisition executive'' and inserting in lieu thereof ``Under 
     Secretary''; and
       (D) in subsection (c)--
       (i) by striking out ``Secretary of a military department'' 
     and inserting in lieu thereof ``Under Secretary''; and
       (ii) by striking out ``in the department''.
       (b) Defense Acquisition Positions.--(1) Section 1722 of 
     title 10, United States Code, is amended--
       (A) in subsection (g), by striking out ``Secretary of each 
     military department, acting through the service acquisition 
     executive for that department,'' and inserting in lieu 
     thereof ``Secretary of Defense''; and
       (B) in subsection (h), by striking out ``or the Secretary 
     of a military department (as applicable)''.
       (2) Section 1724(d) of such title is amended in the first 
     sentence--
       (A) by striking out ``a military department'' and inserting 
     in lieu thereof ``the Department of Defense''; and
       (B) by striking out ``of that military department''.
       (c) Acquisition Corps.--(1) Section 1731 of title 10, 
     United States Code, is amended--
       (A) by striking out subsection (a) and inserting in lieu 
     thereof the following:
       ``(a) Acquisition Corps.--The Secretary of Defense shall 
     establish a Department of Defense Acquisition Corps.''; and
       (B) in subsection (b), by striking out ``an Acquisition 
     Corps'' and inserting in lieu thereof ``the Acquisition 
     Corps''.
       (2) Section 1732 of such title is amended--
       (A) in subsection (b)--
       (i) in paragraph (2)(A)(ii), by striking out ``of the 
     employing military department''; and
       (ii) in paragraph (4), by striking out ``or the Secretary 
     of the military department concerned''; and
       (B) in subsection (d)--
       (i) by striking out ``of a military department'' in the 
     first sentence of paragraph (1) and in paragraph (2); and
       (ii) by striking out ``of that military department'' in the 
     first sentence of paragraph (1).
       (3) Section 1733(a) of such title is amended by striking 
     out ``an Acquisition Corps'' and inserting in lieu thereof 
     ``the Acquisition Corps''.
       (4) Section 1734(a) of such title is amended--
       (A) in paragraph (1)--
       (i) in the first sentence, by striking out ``Secretary of 
     each military department, acting through the service 
     acquisition executive for that department,'' and inserting in 
     lieu thereof ``Secretary of Defense, acting through the Under 
     Secretary of Defense for Acquisition,''; and
       (ii) in the second sentence, by striking out ``concerned''; 
     and
       (B) in paragraph (2), by striking out ``concerned'' in the 
     second sentence.
       (5) Section 1738 of title 10, United States Code (as 
     redesignated by section 203(b)(1)(A)), is amended--
       (A) in subsection (a)--
       (i) in paragraph (1), by striking out ``an Acquisition 
     Corps'' and inserting in lieu thereof ``the Acquisition 
     Corps''; and
       (ii) in paragraph (5), by striking out ``, serving'' and 
     all that follows through ``Department of Defense''; and
       (B) by striking out subsection (c) and inserting in lieu 
     thereof the following:
       ``(c) Waiver.--(1) The Secretary of Defense may waive, on a 
     case-by-case basis, the requirements established under this 
     subchapter with respect to the assignment of an individual to 
     a particular critical acquisition position. Such a waiver may 
     be granted only if unusual circumstances justify the waiver 
     or if the Secretary determines that the individual's 
     qualifications obviate the need for meeting the education, 
     training, and experience requirements established under this 
     subchapter.
       ``(2) The Secretary shall act through the Under Secretary 
     of Defense for Acquisition in exercising the authority 
     provided in paragraph (1). The authority to grant waivers 
     under this subsection may be delegated by the Under Secretary 
     only to the Director of Acquisition Education, Training, and 
     Career Development.''.
       (d) Education and Training.--(1) Section 1741(c) of title 
     10, United States Code, is amended to read as follows:
       ``(c) Programs.--The Under Secretary shall establish and 
     implement the education and training programs authorized by 
     this subchapter.''.
       (2) Section 1742 of such title is amended by striking out 
     ``require that each military department''.
       (3) Section 1743 of such title is amended in the first 
     sentence by striking out ``require that the Secretary of each 
     military department''.
       (e) General Management.--(1) Section 1761(a) of title 10, 
     United States Code, is amended by striking out ``prescribe 
     regulations to ensure that the military departments and 
     Defense Agencies''.
       (2) Section 1762(c) of such title is amended--
       (A) by striking out the parenthetical material in the 
     matter above paragraph (1); and
       (B) in paragraph (4)(A), by striking out ``an acquisition 
     corps'' and inserting in lieu thereof ``the Acquisition 
     Corps''.
       (3) Section 1763 of such title is amended by striking out 
     the second sentence.

     SEC. 703. PROCUREMENT PROCEDURES GENERALLY.

       Chapter 137 of title 10, United States Code, is amended as 
     follows:
       (1) Section 2305(d) is amended--
       (A) in the first sentence of paragraph (1)(A), by striking 
     out ``shall ensure that,'' and all that follows through ``the 
     head of an agency'' and inserting in lieu thereof ``, in 
     preparing a solicitation for the award of a development 
     contract for a major system, shall'';
       (B) in the first sentence of paragraph (2)(A), by striking 
     out ``shall ensure that,'' and all that follows through ``the 
     head of an agency'' and inserting in lieu thereof ``, in 
     preparing a solicitation for the award of a production 
     contract for a major system, shall'';
       (C) by striking out ``the head of the agency'' each place 
     it appears and inserting in lieu thereof ``the Secretary''; 
     and
       (D) by striking out ``the head of an agency'' each place it 
     appears and inserting in lieu thereof ``the Secretary of 
     Defense''.
       (2) Section 2306(h) is amended--
       (A) in paragraph (1), by striking out ``the head of an 
     agency'' in the matter above subparagraph (A) and inserting 
     in lieu thereof ``the Secretary of Defense'';
       (B) in paragraph (2)(D), by striking out ``agencies in'' in 
     the matter above clause (i);
       (C) in paragraph (3), by striking out ``the head of the 
     agency concerned'' and inserting in lieu thereof ``the 
     Secretary of Defense'';
       (D) by striking out paragraph (7);
       (E) in paragraph (10), by striking out ``instruct the 
     Secretary of the military department concerned to''; and
       (F) by redesignating paragraphs (8), (9), (10), and (11) as 
     paragraphs (7), (8), (9), and (10), respectively.
       (3) Section 2307, as amended by section 501(a)(6), is 
     further amended in subsection (g)(7), by striking out the 
     second sentence.
       (4) Section 2311 is amended--
       (A) by striking out ``Except as provided in'' and inserting 
     in lieu thereof ``(a) Except as provided in subsection (b) 
     and''; and
       (B) by adding at the end the following new subsection:
       ``(b) The Secretary of Defense may delegate any authority 
     of the Secretary under this chapter only to--
       ``(1) the Deputy Secretary of Defense, who may successively 
     delegate such authority only to the Under Secretary of 
     Defense for Acquisition;
       ``(2) the Under Secretary of Defense for Acquisition; or
       ``(3) any acquisition program executive officer or 
     acquisition program manager of the Defense Research, 
     Development, and Acquisition Agency.''.
       (5) Section 2318 is amended--
       (A) in subsection (a), by striking out ``Defense Logistics 
     Agency'' each place it appears and inserting in lieu thereof 
     ``Defense Research, Development, and Acquisition Agency''; 
     and
       (B) in subsection (c), by striking out ``Each advocate for 
     competition of an agency'' and inserting in lieu thereof 
     ``The advocate for competition''.
       (6) Section 2320(b) is amended--
       (A) in the matter above paragraph (1), by striking out ``an 
     agency named in section 2303 of this title'' and inserting in 
     lieu thereof ``the Department of Defense''; and
       (B) in paragraph (9), by striking out ``the head of the 
     agency to withhold'' and inserting in lieu thereof ``the 
     withholding of''.
       (7) Section 2324 is amended--
       (A) in subsection (e)--
       (i) in paragraph (2)(C), by striking out ``head of the 
     agency awarding the contract'' and inserting in lieu thereof 
     ``Secretary''; and
       (ii) in paragraph (3)--

       (I) in subparagraph (A), by striking out the matter above 
     clause (i) and inserting in lieu thereof the following:

       ``(A) Pursuant to regulations prescribed by the Secretary 
     and subject to the availability of appropriations, the 
     Secretary may waive the application of the provisions of 
     subparagraphs (M) and (N) of paragraph (1) to a covered 
     contract (other than a contract to which paragraph (2) 
     applies) if the Secretary determines that--'';

       (II) by striking out ``head of an agency'' each place it 
     appears in subparagraphs (B) and (C); and
       (III) in subparagraph (B)(ii), by striking out ``head of 
     the agency will consider granting such waiver, and, if the 
     agency head'' and inserting in lieu thereof ``Secretary will 
     consider granting such waiver, and, if the Secretary'';

       (B) in subsection (h)(2), by striking out ``or the 
     Secretary of the military department concerned''; and
       (C) in subsection (k)(4)--
       (i) by striking out ``the head of the agency that awarded 
     the covered contract'' and inserting in lieu thereof ``the 
     Secretary of Defense'';
       (ii) by striking out ``the agency head'' and inserting in 
     lieu thereof ``the Secretary'';
       (iii) by striking out ``such agency head'' and inserting in 
     lieu thereof ``the Secretary''; and
       (iv) in subparagraph (B), by striking out ``agency'' and 
     inserting in lieu thereof ``Department of Defense''.
       (8) Section 2326 is amended--
       (A) by striking out ``head of an agency'' each place it 
     appears and inserting in lieu thereof ``Secretary of 
     Defense'';
       (B) by striking out ``head of the agency'' each place it 
     appears and inserting in lieu thereof ``Secretary of 
     Defense''; and
       (C) in subsection (a), by striking out ``military 
     department concerned'' and inserting in lieu thereof 
     ``Department of Defense''.
       (9) Section 2327 is amended--
       (A) in subsection (a), by striking out ``The head of an 
     agency'' and inserting in lieu thereof ``The Secretary of 
     Defense'';
       (B) in subsection (b), by striking out ``the head of an 
     agency'' and inserting in lieu thereof ``the Secretary of 
     Defense'';
       (C) in subsection (c)(1)--
       (i) by striking out ``the head of an agency'' each place it 
     appears and inserting in lieu thereof ``the Secretary''; and
       (ii) by striking out ``such head of an agency'' each place 
     it appears and inserting in lieu thereof ``the Secretary'';
       (D) in subsection (c)(2), by striking out ``Upon the 
     request of the head of an agency, the'' and inserting in lieu 
     thereof ``The''; and
       (E) in subsection (d)--
       (i) by striking out ``(1)''; and
       (ii) by striking out paragraph (2).
       (10) Section 2329 is amended--
       (A) in subsection (a), by striking out the second sentence;
       (B) in subsection (b), by striking out ``the Secretary of a 
     military department'' and inserting in lieu thereof ``the 
     Secretary of Defense''; and
       (C) in subsection (c)--
       (i) by striking out ``the Secretary concerned'' each place 
     it appears and inserting in lieu thereof ``the Secretary of 
     Defense''; and
       (ii) by striking out the second sentence of paragraph (3).

     SEC. 704. RESEARCH AND DEVELOPMENT.

       Chapter 139 of title 10, United States Code, is amended as 
     follows:
       (1) Section 2352(a) is amended in the matter above 
     paragraph (1)--
       (A) by striking out ``The Secretary of a military 
     department'' and inserting in lieu thereof ``The Secretary of 
     Defense''; and
       (B) by striking out ``of that military department''.
       (2) Section 2353 is amended--
       (A) in the first sentence of subsection (a)--
       (i) by striking out ``contract of a military department'' 
     and inserting in lieu thereof ``Department of Defense 
     contract''; and
       (ii) by striking out ``the Secretary of the military 
     department concerned'' and inserting in lieu thereof ``the 
     Secretary of Defense''; and
       (B) in subsection (b)(3), by striking out ``the Secretary 
     concerned'' and inserting in lieu thereof ``the Secretary of 
     Defense''.
       (3) Section 2354 is amended--
       (A) in subsection (a), by striking out ``the Secretary of 
     the military department concerned, any contract of a military 
     department'' and inserting in lieu thereof ``the Secretary of 
     Defense, any contract of the Department of Defense'';
       (B) in subsection (c)--
       (i) by striking out ``the Secretary of the department 
     concerned'' and inserting in lieu thereof ``the Secretary of 
     Defense''; and
       (ii) by striking out ``of his department''; and
       (C) in subsection (d), by striking out ``the Secretary 
     concerned'' and inserting in lieu thereof ``the Secretary of 
     Defense''.
       (4) Section 2355 is amended--
       (A) by striking out ``Secretary of each military 
     department'' and all that follows through ``Comptroller 
     General,'' and inserting in lieu thereof ``Secretary of 
     Defense, with the approval of the Comptroller General, may''; 
     and
       (B) by striking out ``his department''.
       (5) Section 2356(a) is amended to read as follows:
       ``(a)(1) Except as provided in paragraph (2), the Secretary 
     of Defense may delegate any authority under section 1584, 
     2353, 2354, 2355, or 2358 of this title to--
       ``(A) the Deputy Secretary of Defense, who may successively 
     delegate such authority only to the Under Secretary of 
     Defense for Acquisition;
       ``(B) the Under Secretary of Defense for Acquisition; or
       ``(C) any employee of the Defense Research, Development, 
     and Acquisition Agency.
       ``(2) The authority of the Secretary under section 
     2353(b)(3) of this title may not be delegated to a person 
     described in paragraph (1)(C).''.
       (6) Section 2367(c) is amended to read as follows:
       ``(c) Funds appropriated to the Department of Defense may 
     not be obligated or expended for purposes of operating a 
     federally funded research center that was not in existence 
     before June 2, 1986, until--
       ``(1) the Secretary of Defense submits to Congress a report 
     with respect to such center that describes the purpose, 
     mission, and general scope of effort of the center; and
       ``(2) 60 days elapse after the date on which such report is 
     received by Congress.''.
       (7) Section 2369 is amended--
       (A) in subsection (a), by striking out ``a program for the 
     supervision and coordination of'' and inserting in lieu 
     thereof ``and conduct appropriate''; and
       (B) by striking out subsection (b) and inserting in lieu 
     thereof the following:
       ``(b) Purpose of Product Evaluation.--The purpose of each 
     product evaluation activity established under subsection (a) 
     is to evaluate products developed by private industry 
     independent of any contract or other arrangement with the 
     United States in order to determine the utility of such 
     products in the Department of Defense.''.
       (8) Subsections (a) and (g) of section 2371 are amended by 
     striking out ``in carrying out advanced research projects 
     through the Defense Advanced Research Projects Agency, and 
     the Secretary of each military department,''.

     SEC. 705. MISCELLANEOUS PROCUREMENT PROVISIONS.

       Chapter 141 of title 10, United States Code, is amended as 
     follows:
       (1) Section 2381 is amended--
       (A) in subsection (a)--
       (i) by striking out ``The Secretary of a military 
     department'' and inserting in lieu thereof ``The Secretary of 
     Defense''; and
       (ii) by striking out ``that department'' in paragraph (1) 
     and inserting in lieu thereof ``the Department of Defense''; 
     and
       (B) in subsection (b)--
       (i) in the matter above paragraph (1), by striking out 
     ``the Secretary concerned'' and inserting in lieu thereof 
     ``the Secretary of Defense''; and
       (ii) in paragraph (2), by striking out ``military 
     department concerned'' and inserting in lieu thereof 
     ``Department of Defense''.
       (2) Section 2385 is amended by striking out ``a military 
     department'' and inserting in lieu thereof ``the Department 
     of Defense''.
       (3) Section 2386 is amended by striking out ``a military 
     department'' and inserting in lieu thereof ``the Department 
     of Defense''.
       (4) Section 2388(a) is amended by striking out ``The 
     Secretary of a military department'' and inserting in lieu 
     thereof ``The Secretary of Defense''.
       (5) Section 2393 is amended--
       (A) in subsection (a)--
       (i) by striking out ``the Secretary of a military 
     department'' in paragraph (1) and inserting in lieu thereof 
     ``the Secretary of Defense''; and
       (ii) by striking out ``the Secretary concerned'' in 
     paragraph (2) and inserting in lieu thereof ``the Secretary 
     of Defense''; and
       (B) in subsection (b), by striking out ``the Secretary 
     concerned'' and inserting in lieu thereof ``the Secretary of 
     Defense''.
       (6) Section 2394 is amended--
       (A) in subsection (a), by striking out ``the Secretary of a 
     military department'' and inserting in lieu thereof ``the 
     Secretary of Defense'';
       (B) by striking out subsection (b); and
       (C) by redesignating subsection (c) as subsection (b).
       (7) Section 2394a is amended--
       (A) in subsection (a)--
       (i) by striking out ``Secretary of a military department'' 
     and inserting in lieu thereof ``Secretary of Defense''; and
       (ii) by striking out ``military department under his 
     jurisdiction'' and inserting in lieu thereof ``Department of 
     Defense''; and
       (B) in subsection (b), by striking out the second sentence.
       (8) Section 2401(a) is amended by striking out ``The 
     Secretary of a military department'' both places it appears 
     and inserting in lieu thereof ``The Secretary of Defense''.
       (9) Section 2403 is amended--
       (A) in subsection (a), by striking out paragraph (8);
       (B) in subsection (b), by striking out ``the head of an 
     agency'' in the matter above paragraph (1) and inserting in 
     lieu thereof ``the Secretary of Defense'';
       (C) in subsections (c), (f), and (g), by striking out 
     ``head of the agency concerned'' each place it appears and 
     inserting in lieu thereof ``Secretary of Defense'';
       (D) in subsection (d)--
       (i) by inserting ``(1)'' after the subsection designation;
       (ii) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively;
       (iii) by striking out the second sentence; and
       (iv) by adding at the end the following new paragraph:
       ``(2) The Secretary may delegate authority under this 
     subsection only to the Under Secretary of Defense for 
     Acquisition.''; and
       (E) in subsection (h)--
       (i) by striking out ``(1)''; and
       (ii) by striking out paragraph (2).
       (10) Section 2405(a) is amended by striking out ``The 
     Secretary of a military department'' and inserting in lieu 
     thereof ``The Secretary of Defense''.
       (11) Section 2406 is amended--
       (A) in subsection (a)--
       (i) by striking out ``head of an agency'' and inserting in 
     lieu thereof ``Secretary of Defense'';
       (ii) by striking out ``with that agency''; and
       (iii) by striking out ``head of the agency'' each place it 
     appears and inserting in lieu thereof ``Secretary''; and
       (B) in subsection (f)--
       (i) by striking out paragraph (1);
       (ii) by redesignating paragraphs (2), (3), and (4) as 
     paragraphs (1), (2), and (3), respectively;
       (iii) by striking out ``2432(a)'' and inserting in lieu 
     thereof ``2430'' in paragraph (1) (as redesignated by clause 
     (ii)); and
       (iv) by striking out ``the head of an agency'' and 
     inserting in lieu thereof ``the Secretary of Defense'' in 
     paragraph (3) (as redesignated by clause (ii)).
       (12) Section 2411(3) is amended by striking out ``Director 
     of the Defense Logistics Agency'' and inserting in lieu 
     thereof ``Under Secretary of Defense for Acquisition''.

     SEC. 706. MAJOR DEFENSE ACQUISITION PROGRAMS.

       Chapter 144 of title 10, United States Code, is amended as 
     follows:
       (1) Section 2433 is amended--
       (A) by striking out ``service acquisition executive 
     designated by the Secretary concerned'' each place it appears 
     and inserting in lieu thereof ``Under Secretary of Defense 
     for Acquisition'';
       (B) in subsection (c)(2), by striking out ``such service 
     acquisition executive'' each place it appears and inserting 
     in lieu thereof ``the Under Secretary of Defense for 
     Acquisition'';
       (C) in subsection (d)--
       (i) by striking out ``the service acquisition executive'' 
     in paragraphs (1) and (2) and inserting in lieu thereof ``the 
     Under Secretary''; and
       (ii) in paragraph (3), by striking out ``If, based upon the 
     service acquisition executive's determination, the Secretary 
     concerned'' and inserting in lieu thereof ``If the Under 
     Secretary of Defense for Acquisition''; and
       (D) in subsection (e)--
       (i) in paragraph (1)(A), by striking out ``Secretary 
     concerned'' and inserting in lieu thereof ``Under Secretary 
     of Defense for Acquisition'';
       (ii) in paragraph (1)(B), by striking out ``Secretary'' and 
     inserting in lieu thereof ``Under Secretary'';
       (iii) in paragraph (2), by striking out ``(as determined by 
     the Secretary'' in the matter above subparagraph (A) and 
     inserting in lieu thereof ``(as determined by the Under 
     Secretary''; and
       (iv) in paragraph (3), by striking out ``by the Secretary'' 
     both places it appears in the first sentence and inserting in 
     lieu thereof ``by the Under Secretary''.
       (2) Section 2434(b)(1) is amended by striking out ``the 
     military department,'' and all that follows and inserting in 
     lieu thereof ``Department of Defense.''.
       (3) Section 2435 is amended--
       (A) in subsection (a)(1), by striking out the matter above 
     subparagraph (A) and inserting in lieu thereof the following:
       ``(a) Baseline Description Requirement.--(1) The Under 
     Secretary of Defense for Acquisition shall establish a 
     baseline description for each major defense acquisition 
     program--''; and
       (B) in subsection (b)--
       (i) in paragraph (1), by striking out ``Secretary of the 
     military department concerned and to the service acquisition 
     executive designated by such Secretary'' and inserting in 
     lieu thereof ``Under Secretary of Defense for Acquisition''; 
     and
       (ii) in paragraph (2), in the matter above subparagraph 
     (A)--

       (I) by striking out ``The Secretary of the military 
     department concerned'' and inserting in lieu thereof ``The 
     Under Secretary of Defense for Acquisition''; and
       (II) by striking out ``180
     days--'' and all that follows and inserting in lieu thereof 
     the following: ``180 days, establish a review panel to review 
     such program and to submit to the Under Secretary a report on 
     the results of such review within 45 days after the date on 
     which the program deviation report is submitted under 
     paragraph (1).''.

       (4) Section 2436 is amended--
       (A) in subsection (a)--
       (i) by striking out ``, through the Secretaries of the 
     military departments,''; and
       (ii) by striking out ``senior procurement executive of the 
     military department concerned'' and inserting in lieu thereof 
     ``Under Secretary of Defense for Acquisition'';
       (B) in subsection (b)--
       (i) by striking out ``Secretary of a military department'' 
     and inserting in lieu thereof ``Secretary''; and
       (ii) by striking out ``under the jurisdiction of the 
     Secretary'';
       (C) in subsection (c)--
       (i) in paragraph (1), by striking out ``Secretary 
     concerned'' and inserting in lieu thereof ``Under Secretary 
     of Defense for Acquisition''; and
       (ii) in paragraph (3), by striking out ``senior procurement 
     executive'' and all that follows and inserting in lieu 
     thereof ``Under Secretary.''; and
       (D) in subsection (d), by striking out ``the senior 
     procurement executive of the military department concerned, 
     with the approval of''.
       (5)(A) Section 2437 is repealed.
       (B) The table of sections at the beginning of chapter 144 
     is amended by striking out the item relating to section 2437.

     SEC. 707. SERVICE SPECIFIC ACQUISITION AUTHORITY.

       (a) Army.--Part IV of subtitle B of title 10, United States 
     Code, is amended by striking out ``Secretary of the Army'' in 
     sections 4501(c), 4502(a), 4503, 4504, 4505, 4506, 4507, 
     4508(a), 4531, 4532(a), 4533, 4535, 4537, 4538, 4540(a), and 
     4542 (each place it appears) and inserting in lieu thereof 
     ``Secretary of Defense''.
       (b) Navy.--Part IV of subtitle C of such title is amended 
     as follows:
       (1) Strike out ``Secretary of the Navy'' in sections 7201, 
     7203(a), 7210(a), 7212(a), 7213, 7229, 7299a (each place it 
     appears), 7301(a), 7309(e), 7311(a), 7311(b), 7312 (each 
     place it appears), 7314, 7341(a), 7342(b), 7345(a), 7361 
     (each place it appears), 7362, 7364, 7365, and 7521 and 
     insert in lieu thereof ``Secretary of Defense''.
       (2) Section 7203 is amended--
       (A) in subsection (a), by striking out ``(a)''; and
       (B) by striking out subsection (b).
       (3) Section 7210 is amended--
       (A) in subsection (a), by striking out ``(a)''; and
       (B) by striking out subsection (b).
       (4) Section 7310(a) is amended by striking out ``Navy'' the 
     first place it appears in the second sentence and inserting 
     in lieu thereof ``Secretary of Defense''.
       (5) Section 7311(a)(1) is amended by striking out ``Navy'' 
     the first place it appears and inserting in lieu thereof 
     ``Secretary of Defense''.
       (6) Section 7314(2) is amended by striking out ``Navy'' and 
     inserting in lieu thereof ``Department of Defense''.
       (7) Section 7363 is amended in the first sentence--
       (A) by striking out ``Department of the Navy'' and 
     inserting in lieu thereof ``Secretary of Defense''; and
       (B) by striking out ``Secretary'' and inserting in lieu 
     thereof ``Secretary of Defense''.
       (8) Section 7521 is amended by striking out ``contract made 
     by the Department of the Navy'' in the first sentence and 
     inserting in lieu thereof ``contract entered into for the 
     Department of the Navy''.
       (9) Section 7522 is amended by striking out ``Secretary of 
     the Navy'' and all that follows through ``chiefs of bureaus'' 
     and inserting in lieu thereof ``Secretary of Defense''.
       (c) Air Force.--Part IV of subtitle D of such title is 
     amended in sections 9501(c), 9502(a), 9503, 9504, 9505, 9506, 
     9507, 9511(11), 9531, 9532, 9535, 9537, 9538(a), and 9540(a) 
     by striking out ``Secretary of the Air Force'' and inserting 
     in lieu thereof ``Secretary of Defense''.

     SEC. 708. OTHER LAWS.

       In any other provision of law providing authority for the 
     Secretary of a military department or the head of a Defense 
     Agency of the Department of Defense to perform a research, 
     development, or acquisition function of the Department of 
     Defense, the reference to that official shall be deemed to 
     refer to the Secretary of Defense. That function shall be 
     performed as provided in section 133(b) of title 10, United 
     States Code (as amended by section 301(a)), and section 232 
     of such title (as added by section 301(b)).

                       TITLE VIII--EFFECTIVE DATE

     SEC. 801. EFFECTIVE DATE.

       This Act and the amendments made by this Act shall take 
     effect on the first day of the fiscal year that begins on or 
     after the date of the enactment of this Act and, in the case 
     of provisions and amendments that set forth contracting 
     procedures, shall apply with respect to contract 
     solicitations that are issued on or after such effective 
     date.
 Mr. COHEN. Mr. President, today Senator Roth and I are 
introducing legislation to significantly improve the accountability of 
Federal managers who spend money on behalf of taxpayers. The 
legislation will also make huge strides to hold contractors accountable 
for the promises they make to the taxpayers when they sign contracts 
with the Federal Government. The reforms outlined in this legislation 
have the potential to save taxpayers an estimated $20 billion annually.
  For years, the press has accurately reported how the Government has 
wasted money when purchasing goods and services. In recent years we 
have seen reports outlining how Department of Defense officials agreed 
to pay millions of dollars for unneeded goods like the 1.2 million 
bottles of nasal spray that say expiring on a shelf in a Government 
warehouse; or how Department of Energy officials agreed to pay the 
fines of contractors who violated Federal environmental laws, and to 
reimburse contractors for property stolen by the contractor's own 
employees; or how Resolution Trust Corporation officials approved a 
contract that allowed a contractor to charge the taxpayer 67 cents a 
page to photocopy thousands of bank records when comparable copies at 
Kinko's cost 3 cents; or the Federal Deposit Insurance Corporation 
officials who paid a contractor $300 every time it mowed a lawn which 
was roughly the size of a basketball court. In each of these cases we 
heard excuses and finger pointing rather than acceptance of 
responsibility. We will not successfully curb these types of problems 
until we begin to hold Government decisionmakers responsible for their 
actions.
  The legislation we are introducing today establishes that Federal 
employees who purchase goods and services on behalf of the Federal 
Government will be held accountable for those purchases in much the 
same way a private sector employee is held accountable when he or she 
buys goods and services for a business. In the private sector, an 
employee is expected to make decisions that are in the best economic 
interest of the employer. If the decisions result in success, the 
employee is rewarded. If not, the employee receives no reward. This 
incentive system, known as ``pay for performance,'' has produced 
successful results in the private sector and should be tested in the 
Government's acquisition work force.

  In the case of the private sector, the most successful enterprises 
understand and invest in the training of its work force to ensure that 
the employees are qualified to perform these duties effectively and 
efficiently. This legislation will ensure that the Federal procurement 
work force is qualified and formally trained to act in the best 
interest of the taxpayers. A trained, reliable, and competent Federal 
procurement work force, that is rewarded when it performs well and is 
not rewarded when it fails, will provide a front line defense against 
contract waste and mismanagement in the Federal Government.
  A trained and capable work force is only half of the answer to how we 
can improve the administration of Federal contracts. The other half of 
our legislative solution calls for a contractor to achieve the cost, 
schedule, and performance goals outlined in its contract with 
Government. The concept is similar to the business judgment my 
constituents in Maine make when they decide to buy services or 
appliances. The concept is simple--if the contractor does not keep its 
promises to the taxpayer, the government may withhold its payments.
  The bill provides an additional incentive by requiring those 
contractors with a record of performance on Government contracts to 
compete for future Government contracts not only on price, but on the 
contractor's performance record on is past Government contracts. This 
will prevent poorly performing contractors from competing on an equal 
basis for future Government contracts with those contractors who have 
performed well.
  These measures of increased accountability should also halt the 
Government's payment of bonuses to contractors whose projects are 
poorly managed, late and/or grossly over budget. As an example, NASA 
has paid bonuses to contractors who managed a number of failed 
programs. Examples include: $20 million in contractor bonuses for the 
Hubble space telescope which required costly repairs before it could 
work as envisioned; a $17 million contractor bonus for the Mars 
Observer which spun out of control and is now lost in space thanks to 
critical contractor failures; and a $5 million contractor bonus for the 
Gamma Ray Observatory, a program which exceeded its budget by more than 
$40 million. The legislation we are proposing today, would only permit 
the payment of bonuses to contractors if their programs were under 
cost, ahead of schedule and/or performed better than expected. This 
provision will put a halt to the payment of bonuses to poorly 
performing Government contractors.

  Mr. President, this legislation also increases the threshold to 
$500,000 under the Davis-Bacon Act, which requires Government 
contractors to pay prevailing wages to their employees. Not only will 
this legislation update the 60-year-old Davis-Bacon law, but it will 
save the taxpayer an estimated $448 million in outlays over 5 years by 
reducing the cost of construction. In addition, by raising the 
threshold, the U.S. Department of Labor, which is charged with 
administering and enforcing the Davis-Bacon Act, will be better able to 
enforce prevailing wages on large dollar volume contracts. With the 
huge Federal deficit and the demand by our constituents that we reduce 
Government spending, I firmly believe the time has come to take a fresh 
look at the ramifications of the Davis-Bacon Act as it now exists.
  Mr. President, we believe that adding incentives and accountability 
to the Federal procurement system will provide the Government with 
needed tools to fight Government waste and mismanagement. I would urge 
my colleagues to support this legislation.
                                 ______

      By Mr. DOMENICI (for himself, Mr. Nunn, Mr. Dodd, Mr. Danforth, 
        Ms. Mikulski, Mr. Cochran, Mr. Lieberman, Mr. Bennett, Mr. 
        Dorgan, and Mr. Conrad):
  S.J. Res. 178. A joint resolution to proclaim the week of October 16 
through October 22, 1994, as ``National Character Counts Week''; to the 
Committee on the Judiciary.


                     National Character Counts Week

  Mr. DOMENICI. Mr. President, over the past few years most of us in 
this Chamber have heard or delivered statements about the importance of 
revitalizing or reinvigorating this country's moral compass or its 
value system. We have heard statistics from educators, national 
organizations, judges, journalists, law enforcement personnel, and 
parents that the young people of this country simply do not recognize 
the fundamental precepts of right and wrong.
  I might add to my prepared remarks that the distinguished occupant of 
the chair, while he was chairing a commission, had a chapter on young 
people in our country, and I read it carefully and in fact talked with 
the distinguished Senator from West Virginia [Mr. Rockefeller] about 
it. The conclusions that were drawn obviously did not fall on deaf 
ears, because many of us now have learned that values or morality are 
very controversial. In fact, many do not think they ought to be 
discussed by public officials, and certainly it is very difficult to 
say what they are, at least from the standpoint of expecting unanimity 
of reception and people agreeing with your conclusions.
  Our desire not to offend our fellow citizens seems to have left us 
collectively speechless about the fundamental character of our society. 
In our legitimate desire not to impose our beliefs on others, we have 
fumbled and stumbled around that issue. As a consequence, we may have 
left the impression that the Nation no longer has any respect for basic 
values that one generation transmits to another.
  Now, I believe the time for that kind of thinking and acting has to 
come to a stumbling stop. The time has come to join in a crusade and 
stand up with countless thousands of Americans who believe that we have 
to face this issue head on with honesty, fairness, and understanding. 
We can say that there is really a crisis in character and we can offer 
some fundamental precepts that are positive guideposts for addressing 
these concerns.

  Senator Nunn, myself, and six other Senators, equally divided among 
Republicans and Democrats, have gotten together and established an 
informal group called the Senate ``Character Counts Group.'' Our 
objective is to find ways in which we can support, individually or 
collectively, publicly--and, when appropriate, even legislatively--the 
promotion of character education and character training throughout 
America.
  Our primary goal is to be supportive of families and communities, 
schools, and youth organizations, religious institutions, civic groups 
and all those who care deeply about our country's children.
  A few weeks ago, Alex Dominguex of the Associated Press wrote an 
article entitled ``Schools by Scruples.'' I was struck by the words of 
Boston University's Kevin Ryan commenting on why there has been 
insufficient evaluation and studies on character education:
  The reason for that is that the Federal Government is gutless, afraid 
to fund anything so controversial. This is really a core issue and they 
just flee from it.
  This group of Senators has decided that it does not need to flee from 
this issue.
  The first initiative that we are pursuing is the introduction of a 
resolution here tonight that I will send to the desk for proper 
referral declaring the week of October 16 through 22 of 1994 as 
``National Character Counts Week.''

  The resolution articulates six core elements of character. These six 
elements coincide with the six core ethical values that were developed 
in July of 1992 by an eminent group of ethics scholars, educators, and 
representatives of youth organizations who came together to determine 
if a common ground and a common language could be found concerning the 
need and the content of character education. As a result of their 
efforts, a consensus was reached that there were fundamental character 
elements that all could support. The result is known as the Aspen 
Declaration.
  The six core elements of character are trustworthiness, respect, 
responsibility, justice and fairness, caring, and civic virtue and 
citizenship. It calls on communities, especially schools of our land, 
young organizations to integrate these six core elements of character 
into programs serving students and children.
  This Senate Character Counts Group believes that these six core 
elements constitute the fundamental list of character elements. We can 
support them unequivocally, and as my remarks are either heard or read 
I ask whether anyone really objects to any of these six core character 
values.
  These, as I just indicated, are easy to support but obviously 
difficult to achieve and equally difficult to educate our young people 
about. We are merely saying that these six are noncontroversial and in 
and of themselves constitute the core character elements of any 
character-building program.
  Mr. President, long ago, the Greeks in this country, the Greeks in 
Greece, their homeland, through their leaders said something very 
fundamental: A country must have character, and it will only have 
character if the individuals that make up its population have 
character.
  Something is going wrong in the United States. I believe it is the 
demise and disintegration of core character qualities among our people, 
and it is time that those of us in elected office see fit to join in a 
renaissance or crusade to see what we can do to change that.
  There are those who question whether Government should ever be 
involved in the issue of character building programs. In answer to 
that, my views are that Government can help, can institute or change 
policies, and can supplement what others are doing. Government alone 
cannot, and should not, supplant our individual and collective 
responsibilities. Therefore, Government's role in character building 
efforts should be to support families, communities, and organizations 
with their programs. I believe that character education and training is 
a public policy issue, and one that Government can and should endorse.
  There are many instances when Government can play a positive and 
constructive role in character building programs. For example, FBI 
Director Louis J. Freeh recently announced that the FBI would institute 
guidelines regarding the conduct of its employees. The FBI Director 
stated that ``core values such as integrity, reliability, and 
trustworthiness'' must be upheld and revered. To me, this represents 
what's totally right about Government intervention in character 
building programs.
  We, in Congress, and all our public policymakers and leaders may want 
to think about David Broder's comments in his article, ``Beware the 
Unattached Male'':

       . . . it is no longer possible to pretend that the values 
     by which people live their lives don't matter. The public no 
     longer buys that, if it ever did, so ``experts'' who cling to 
     that belief are increasingly marginalized in the policy 
     debates.
       When the experts shake off their fright about values, 
     however, they really can help inform the political dialogue. 
     . . . In retrospect, it's amazing that American politics was 
     hung up for so long in partisan debate about ``family 
     values.'' Now that it's largely over, perhaps we can work at 
     reversing some of those trend lines (the Index of Leading 
     Cultural Indicators) Bennett charts.

  Most of us recognize the central role of the family in shaping the 
values of young people. At the same time, we must also acknowledge that 
too many children are raised without the benefit of positive family 
influences. Furthermore, even the most caring and involved parents need 
support. All of our social institutions--the family, our schools, 
churches, and civic organizations--must work in concert to emphasize 
responsibility, self-discipline, self-restraint, and character. As the 
old proverb says: ``It takes a whole village to raise a child.''
  Today, the people of this Nation enjoy more freedom, more privilege 
than we have ever known. But increased individual liberty brings with 
it additional personal responsibility. The choices we face are 
difficult, but we have an obligation, a civic responsibility to 
confront them. As journalist E.J. Dionne observed:

       Talk of citizenship and civic virtue sounds utopian. In 
     fact, it is the essence of practical politics. Only by 
     restoring our sense of common citizenship can we hope to deal 
     with the most profound and practical issues before us.

  It is no longer enough to look toward others to solve our collective 
problems. We, as citizens, must roll up our sleeves and pitch in. The 
health of a democratic society may be measured by the quality of the 
functions performed by private citizens.
  Last year, I learned about a special partnership of some of our 
Nation's most influential and diverse organizations involved with our 
young people. This partnership, called the Character Counts Coalition, 
combines the resources and experience of more than 40 groups, and 
unites them in striving toward the common mission of reinvigorating--
and in some cases reawakening--a strong sense of character 
in America's youth. This coalition is built upon the six core ethical 
values, which they refer to as the Six Pillars of Character.
  Why do I say this partnership is special? Let me read a list of some 
of the groups that support and endorse the coalition and its Six 
Pillars. The American Federation of Teachers, the American Red Cross, 
the Association of College and University Religious Affairs, the Child 
Welfare League of America, 4-H, Little League baseball, the National 
Association of Catholic School Teachers, the National Association of 
State Boards of Education, the National Council of La Raza, the 
National Urban League, and the YMCA. This diversity of this group 
further supports the position that the Six Pillars have universal 
appeal and rise above any single religious, political, or social 
agenda.
  As important, its council of advisers is as diverse as are its 
supporting organizations. The council members are William Bennett of 
Empower America; Marian Wright Edelman, president of the Children's 
Defense Fund; former U.S. Congresswoman Barbara Jordan; actor Tom 
Selleck; Nina Link, publisher of the Children's Television Workshop; 
and Sylvia Peters, a founding partner of the Edison Project and a top-
notch educator. Again, this illustrates the coalition's bipartisan, 
broad-based support for its programs and objectives.
  The Character Counts Coalition, its participating members, and its 
advisory council believe that strong character makes stronger 
individuals and thus a stonger nation. Each organization I mentioned 
earlier, as part of their membership in the coalition, has pledged to 
integrate more consistently and effectively character into new and 
existing programs.
  I would like to mention that I am very proud that there is already 
considerable support for the Character Counts Coalition and the Six 
Pillars of Character in my home State of New Mexico. Six months ago, 
the Bel-Air public school in Albuquerque adopted the Character Counts 
program, and according to the assistant principal Dennis Romero, 
lessons on values are integrated into all class subjects and school 
activities. Thus far, school surveys report that the program is 
working, and school officials want to continue to develop the program 
as they analyze and evaluate its effectiveness over the next couple of 
years. I would like to have the Albuquerque Journal article about this 
innovative approach added at the end of my remarks.
  In addition to the Bel-Air school program, on March 2, of this year, 
the Albuquerque public schools announced its resolution to endorse and 
implement Character Counts Program in the Albuquerque public schools. 
Among its decisions to promote the Six Pillars of Character and the 
Character Counts Program, the resolution states this important 
objective:

       That all schools examine school curriculum and practices to 
     identify and extend opportunities for developing character, 
     especially through the utilization of violence-prevention 
     programs, mediation training, community service programs, 
     fair rules which are fairly enforced, democratic practices in 
     classrooms and organizations, and extracurricular activities 
     which help students learn and model caring and ethical 
     behavior.

  To say I am extremely proud of this creative approach to our public 
school education by the Albuquerque public schools is an 
understatement. This is what America's parents, families, State and 
local governments, and community organizations have been telling us for 
years--that character building is the responsibility of all of us, 
including our schools. I request that a copy of this resolution be made 
a part of the Record following my remarks.
  We all are in this together. By these efforts today, Senator Nunn and 
I, and our colleagues--Senators Dodd, Mikulski, Cochran, Lieberman, and 
Bennett--are stating for the Record that we can fully support the Six 
Pillars of Character. We support the Aspen declaration that states:

       The character and conduct of our youth reflect the 
     character and conduct of society; therefore, every adult has 
     the responsibility to teach and model the core ethical values 
     and every social institution has the responsibility to 
     promote the development of good character.

  We will continue our efforts in the days and months ahead to speak 
out about these Six Core Elements of Character and to find ways that 
will draw attention to these precepts in our work here in the Senate.
  As a beginning, we invite all of our colleagues in the Senate to 
support this resolution. We want to see this resolution passed in both 
the Senate and in the House of Representatives, and have it signed by 
the President of the United States. We believe it sends a message of 
support to all those individuals and organizations who are working with 
such deep compassion for and commitment to America's youth. By passing 
this resolution, we are confirming our participation in this important 
national effort.
  Mr. President, I ask unanimous consent that the joint resolution and 
additional materials be included in the Record.

                             S.J. Res. 178

       Whereas young people will be the stewards of our 
     communities, nation, and world in critical times, and the 
     present and future well-being of our society requires an 
     involved, caring citizenry with good character;
       Whereas concerns about the character training of children 
     have taken on a new sense of urgency as violence by and 
     against youth threatens the physical and psychological well-
     being of the nation;
       Whereas more than ever, children need strong and 
     constructive guidance from their families and their 
     communities, including schools, youth organizations, 
     religious institutions and civic groups;
       Whereas the character of a nation is only as strong as the 
     character of its individual citizens;
       Whereas the public good is advanced when young people are 
     taught the importance of good character, and that character 
     counts in personal relationships, in school, and in the 
     workplace;
       Whereas scholars and educators agree that people do not 
     automatically develop good character and, therefore, 
     conscientious efforts must be made by youth-influencing 
     institutions and individuals to help young people develop the 
     essential traits and characteristics that comprise good 
     character;
       Whereas character development is, first and foremost, an 
     obligation of families, efforts by faith communities, 
     schools, and youth, civic and human service organizations 
     also play a very important role in supporting family efforts 
     by fostering and promoting good character;
       Whereas the Congress encourages students, teachers, 
     parents, youth and community leaders to recognize the 
     valuable role our youth play in the present and future of our 
     nation, and to recognize that character is an important part 
     of that future;
       Whereas in July 1992 the Aspen Declaration was written by 
     an eminent group of educators, youth leaders and ethics 
     scholars for the purpose of articulating a coherent framework 
     for character education appropriate to a diverse and 
     pluralistic society;
       Whereas the Aspen Declaration states that ``Effective 
     character education is based on core ethical values which 
     form the foundation of democratic society'';
       Whereas the core ethical values identified by the Aspen 
     Declaration constitute the Six Core Elements of Character;
       Whereas these Six Core Elements of Character are--
       (1) Trustworthiness.
       (2) Respect.
       (3) Responsibility.
       (4) Justice and Fairness.
       (5) Caring.
       (6) Civic Virtue and Citizenship.
       Whereas these Six Core Elements of Character transcend 
     cultural, religious, and socioeconomic differences;
       Whereas the Aspen Declaration states that ``The character 
     and conduct of our youth reflect the character and conduct of 
     society; therefore, every adult has the responsibility to 
     teach and model the core ethical values and every social 
     institution has the responsibility to promote the development 
     of good character.'';
       Whereas the Congress encourages individuals and 
     organizations, especially those who have an interest in the 
     education and training of our youth, to adopt these Six Core 
     Elements of Character as intrinsic to the well-being of 
     individuals, communities, and society as a whole; and
       Whereas the Congress encourages communities, especially 
     schools and youth organizations, to integrate these Six Core 
     Elements of Character into programs serving students and 
     children: Now, therefore, be it
       Resolved by the Senate and House of Representatives of the 
     United States of America in Congress assembled, That the week 
     of October 16 through October 22, 1994, is designated as 
     ``National Character Counts Week'', and the President is 
     authorized and requested to issue a proclamation calling upon 
     the people of the United States and interested groups to 
     embrace these Six Core Elements of Character and to observe 
     the week with appropriate ceremonies and activities.
                                  ____


             [From the Albuquerque Journal, Mar. 15, 1994]

Character Counts for Bel-Air Pupils--Respect, Fairness Part of Learning

                          (By Tracy Dingmann)

       ``Remember R.A.K.''--random acts of kindness--say the 
     little pink and yellow signs posted all over Bel-Air 
     Elementary.
       Dotting the walls are bright blue certificates honoring 
     ``local heroes'' for their good deeds.
       And hand-lettered poems featuring ``caring,'' the word of 
     the month, decorate nearly every inch of the halls.
       What's happening here?
       It's called character education, and Bel-Air, at 4725 
     Candelaria NE, is the first Albuquerque Public Schools campus 
     to give it a try.
       Six months ago, Bel-Air adopted a national program called 
     Character Counts, which advocates infusing students with six 
     core values trustworthiness, respect, responsibility, 
     fairness, caring and citizenship.
       The program was developed two years ago during a conference 
     in Aspen, Colo., by the Josephson Institute of Ethics, a 
     consortium of religious groups, community leaders, educators, 
     parents and students.
       Last week, the Albuquerque Public Schools board unanimously 
     endorsed putting Character Counts in all APS schools.
       Bel-Air staffers use various methods to teach students 
     about he values, from choosing films and books that reflect 
     them to setting up play-acting situations, discussions and 
     word games.
       Lessons on values span all subjects and aren't confined to 
     any class, says assistant principal Dennis Romero.
       ``There is no set curricula,'' he said. ``The values are an 
     umbrella under which we do other things.''
       The program has brought good things to Bel-Air, says school 
     counselor Mary Jane Aguilar.
       For example, the number of slips issued to students for 
     discipline problems dropped from 64 in September to 17 in 
     December, she said.
       And a recent survey shows staffers heartily support the 
     initiative and see an improvement in student behavior both in 
     and outside the classroom.
       Perhaps more importantly, kids report feeling the changed 
     atmosphere.
       ``I feel safer,'' said fifth-grader Claire Long, who added 
     she had often been picked on by her classmates. ``Last year, 
     I would just put my head down on my desk and cry two or three 
     times a week.''
       Bel-Air principal Charles Lefkofsky said the school decided 
     to pioneer Character Counts for APS after a parent told 
     school workers they ``weren't living in the real world.''
       Schools preach against fighting; but the parent said in 
     ``real life,'' kids have to stick up for themselves and fight 
     back.
       ``We didn't realize it, but we had one set of rules, and 
     the community had another,'' said Aguilar.
       The problem isn't confined to the Bel-Air neighborhood, 
     Aguilar said. ``Violence as a first response really permeates 
     our youth. It's like that all over the city. It doesn't 
     matter where you are.''
       So the Bel-Air staff tackled the problem by inviting 
     students and their families to learn a different way to 
     react.
       The staff began by crafting a definition for each of the 
     six core values that all students could understand.
       For example, responsibility was defined as: ``You know what 
     is expected. You do what is expected. Others can depend on 
     you to know and do what is expected.''
       Making the words actually mean something to the children 
     was harder than it sounds, Romero said.
       Next, staffers identified certain actions associated with 
     each word, such as ``doing things without your mother 
     reminding you'' as examples of being trustworthy.
       Lastly, they encourage students to ``model'' the value 
     expressed in the word of the month.
       To reward those who do good things, Bel-Air holds 
     assemblies and hands out certificates.
       The school gets the whole community involved by discussing 
     the program at PTA meetings, bringing parents in to perform 
     skits during assemblies, and posting inspirational messages 
     on the school's marquee.
       Though teaching values has improved the school's 
     atmosphere, staffers at Bel-Air think the program will 
     eventually benefit the students academically, too.
       ``If kids feel safe, then they're able to focus on 
     academics, and not about who's going to beat them up after 
     school,'' Romero said. ``We're hoping test scores are going 
     to reflect that, but we don't know. It might take a couple of 
     years.''
       Launching the program districtwide recently won support 
     from the board and the Albuquerque Teachers Federation, but 
     staffers at Bel-Air say they have concerns.
       The program won't work unless everyone at the school 
     believes in it and wants to do it, said Aguilar. Also, she 
     said putting the program together takes lots of work and time 
     and there's no instruction manual for doing it.
       ``If they don't make a real commitment, it will all go by 
     the wayside,'' she said.
                                  ____


  Resolution To Endorse and Implement Character Counts Program in the 
                       Albuquerque Public Schools

       Whereas, Albuquerque Public Schools reaffirms the need to 
     join with other community groups to actively engage in the 
     development and demonstration of ethical behavior among youth 
     and adults, and
       Whereas, the mission of Albuquerque Public Schools is to 
     provide learners of all ages the skills and knowledge needed 
     to become successful and productive members of a dynamic 
     society, and
       Whereas, the Albuquerque Public Schools recognizes that 
     students in our schools are more likely now than in the past 
     to experience family disintegration, homicide, drug use, teen 
     age pregnancy, dishonesty, suicide, and strong messages from 
     media and society that undermine home teaching of ethical 
     values, and
       Whereas, the Albuquerque Public Schools recognizes that no 
     single community institution can instill ethical behavior in 
     youth and adults if it is acting without the support of other 
     institutions and groups, and
       Whereas, the Albuquerque Public Schools recognizes the 
     important role played by teachers and other adults in school 
     settings in modeling good character for young people
       Now, therefore, be it resolved:
       1. That the Albuquerque Public Schools endorses the Aspen 
     Declaration on Character Education as well as the Character 
     Counts Program as ways to develop character based on six core 
     ethical values: trustworthiness, respect, responsibility, 
     fairness, caring, and citizenship;
       2. That the Albuquerque Public Schools will enter into 
     community-wide discussions with other institutions and groups 
     to reach agreements about the role of each in promoting 
     ethical behavior among young people and adults in various 
     aspects of life;
       3. That the Albuquerque Public Schools District is 
     committed to creating models of ethical behavior among all 
     adults who serve students and school;
       4. That the core curriculum should continue to give 
     explicit attention to character development as an ongoing 
     part of school instruction;
       5. That the materials, teaching methods, partnerships, and 
     services to support school programs shall be selected, in 
     part, for their capacity to support the development of 
     character among youth and adults;
       6. That all schools examine school curriculum and practices 
     to identify and extend opportunities for developing 
     character, especially through the utilization of violence-
     prevention programs, mediation training, community service 
     programs, fair rules which are fairly enforced, democratic 
     practices in classrooms and organizations, and 
     extracurricular activities which help students learn and 
     model caring and ethical behavior.

 Mr. COCHRAN. Mr. President, we are at a critical point in our 
country today. We can either choose the path toward anarchy--more 
violence, more crime, more high school dropouts, more broken families, 
and other problems which have become all too familiar. Or, we can take 
the path toward more personal involvement with our families, churches, 
communities, and political institutions and try to be a more positive 
and stronger influence on the lives of others.
  Our democratic society provides Americans with the greatest 
individual freedom of any country in the world but it also demands that 
each of us take responsibility for its preservation. Dramatic increases 
in crime and a general disregard for the well-being of others threaten 
the very foundation of our democratic society. The growing incidence of 
crime among young people is particularly disturbing. It is a threat to 
our country's future.
  Families, churches, teachers, and communities all help shape the 
attitudes of children.
  We all share in the responsibility of teaching and setting examples 
for our children. Parents and other family members, of course, are the 
first and most influential teachers, but everyone contributes to a 
child's development.
  The coalition of eight Senators who have come together to introduce 
this joint resolution will continue to work to support education 
initiatives and other activities to help instill ethical values into 
our nation's young people.
  I am convinced that by building a strong personal sense of 
character--as described in the six core elements of character outlined 
in this joint resolution of trustworthiness, respect, responsibility, 
justice and fairness, caring, and civic virtue and citizenship--we will 
help young people stand up to challenges and contribute positively to 
the communities in which they live.
  We must choose the right path today. I am pleased to join in 
sponsoring this resolution to designate October 17 through 21, 1994 as 
``National Character Counts Week.'' Once adopted, this resolution will 
increase public awareness of the six pillars of character and focus 
attention on taking the right path--a path toward national strength and 
guaranteeing that America stays on the right track. I urge other 
Senators to support the joint resolution.

                          ____________________