[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.
____________________