[Congressional Record Volume 143, Number 8 (Tuesday, January 28, 1997)]
[Senate]
[Pages S730-S734]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BOND:

  S. 208. A bill to provide Federal contracting opportunities for small 
business concerns located in historically underutilized business zones, 
and for other purposes; to the Committee on Small Business.


                        The Hubzone Act of 1997

  Mr. BOND. Mr. President, today I introduce the HUBZone Act of 1997. 
The purpose underlying this bill is to create new opportunities for 
growth in distressed urban and rural communities, which have suffered 
tremendous economic decline. This legislation would provide for an 
immediate infusion of cash through the creation of new jobs in our 
Nation's economically distressed areas. During the 8 years I served as 
Governor of Missouri, I met frequently with community leaders who were 
seeking help in attracting business and jobs to their cities, their 
central downtown areas, their towns, and the rural areas of the State. 
We tried various programs, including the enterprise-zone concept, and 
we met with limited success. I am proud of the successes that we 
achieved there. But now, as U.S. Senator and as chairman of the 
Committee on Small Business, I continue to receive similar pleas for 
help. I hear the concerns expressed to me by people from all over my 
State. Since we have had the opportunity to expand hearings in other 
States, we have heard from other States as well.
  So far, nothing that we put in place is the best formula for bringing 
economic hope and independence to these communities. The message, 
however, has changed somewhat. Although help from the Federal 
Government has been forthcoming, there is still high unemployment and 
poverty. For example, when I was talking about a summer jobs program 
with one very, very good community leader, he told me that the summer 
jobs program was nice, but, he said, ``Stop sending me job training 
money. What we need right here in this part of the city is jobs, and 
more jobs. We have all the job training money we need. We need jobs to 
put these young people to work.'' And that is a problem that I hear 
time and time again.
  Last March, I chaired a hearing before the Committee on Small 
Business on revitalizing inner cities and rural America and S. 1574, 
the HUBZone Act of 1996, which is nearly identical to the bill I am 
introducing today. Testifying before the committee were the cofounder 
and employees of e.villages, which has established a data management 
enterprise at Edgewood Terrace, an assisted multifamily housing project 
right here in Washington, DC. Residents of the housing project have 
been trained and they have established a new enterprise, Edgewood 
Technology Services, or ETS, which to me is a prototype HUBZone 
business.
  The HUBZone Act of 1997 can have an important impact on our Nation's 
economically distressed inner cities as housing and income subsidies 
are reduced and put under constraints and as we work toward the 
national goal of moving people off the welfare rolls and into 
meaningful jobs.
  Testifying in support of the HUBZone Act of 1996 was C. Austin Fitts, 
cofounder of e.villages, who testified about the ``significant 
relationship between'' S. 1574 and Federal housing policy. Ms. Fitts 
emphasized the importance of this legislation to create new inner city 
jobs for unemployed or underemployed residents.
  The income generated by these new HUBZone jobs can offset the 
reduction of housing and income supplements. Furthermore, as an 
employee of ETS testified in support of the HUBZone bill, ``We at 
e.villages are encouraged that the Congress is trying to find some ways 
to get work for us to do, and to enhance our standard of living.''
  I do not claim that the HUBZone Act of 1997 is going to solve all the 
problems, but I think it is a significant step in the right direction. 
These people who benefited from an enterprise started up in an assisted 
housing development without the benefit of the HUBZone provisions know 
that their example of success can be expanded. It can work and it can 
work on a broader basis. And it can bring more and more people into 
productive employment.
  What distinguishes the HUBZone Act of 1997 from some other excellent 
proposals and well-intentioned efforts is that this bill would have an 
immediate impact on economically distressed communities. In recent 
years, numerous legislative proposals have stressed the importance of 
changing the U.S. Tax Code and providing other incentives to attract 
businesses to the needy communities. Many of these proposals have 
merit, and I have supported them. As I said, I have supported 
enterprise zones. I have recommended it to the Missouri General 
Assembly. As Governor, I signed it into law. I saw it work. I saw it 
could bring benefits to areas of high unemployment. I urge my 
colleagues on other committees to take a look at those measures which 
can have an impact. No one of them is going to be the total solution. 
Let us move forward on all of them.

  But I ask my colleagues to focus on the critical differences between 
those proposals and the provisions of the HUBZone Act of 1997. Under 
the HUBZone bill, entire communities would benefit because we would 
create absolute incentives for small businesses to operate and provide 
employment directly within America's most disadvantaged inner city 
neighborhoods and in the areas of high unemployment and poverty in 
rural areas. It is a matter of timing. The HUBZone Act of 1997 helps 
communities and their residents now. This bill is a matter of direct 
focus. This is not just incentives; this is bringing business to the 
areas of high unemployment and high poverty.
  Specifically, the HUBZone Act of 1997 creates a new class of small 
businesses eligible for Federal Government contract set-asides and 
preferences.
  To be eligible, a small business must be located in what we call a 
Historically Underutilized Business Zone--

[[Page S731]]

that is where HUBZone comes from, Historically Underutilized Business 
Zone--and not less than 35 percent of the work force must reside in a 
HUBZone. That is a key difference between some of the programs that are 
initially targeting to bring jobs to areas of need, bring jobs where 
social problems had flared up, such as the Watts riots many years ago.
  It is important to contrast the HUBZone proposal with the Executive 
order promulgated by President Clinton to establish an empowerment 
contracting commission. I commend the President for focusing on the 
value of targeting Federal Government assistance to low-income 
communities, but I think the program falls short of meeting the goal of 
helping low-income communities and their residents. For example, under 
the President's plan, any business, large or small, located in a low-
income community, would qualify for a valuable contracting preference, 
even if it does not employ one resident of the community. This is 
clearly a major deficiency or loophole when trying to assist the 
unemployed or underemployed.
  A further weakness in the President's proposal is the failure to 
define more clearly criteria which makes a community eligible for this 
program. Unfortunately, we see the possibility, and it has been set 
forth in specific detail by the inspector general of HUD, that a lack 
of objective criteria may invite other influences in the political 
selection of an area to receive these preferences.
  We must avoid creating another Federal Government program that ends 
up helping well-off individuals and companies while failing to have a 
significant impact on the poor, the unemployed and the underemployed.
  I think the HUBZone Act of 1997 can and will make a difference. It 
makes a contracting preference available only if the small business is 
located in an economically distressed area and employs 35 percent of 
its work force from a HUBZone. This is a significant difference and one 
that is clearly designed to help attack deeply seated poverty in too 
many areas of the United States.
  To qualify for the program, the small business must certify to the 
Administrator of the U.S. Small Business Administration that it is 
located in a HUBZone and will comply with certain rules governing 
subcontracting. In addition, a qualified small business must agree to 
perform at least 50 percent of the contract in a HUBZone, unless the 
terms of the contract require they be located outside the HUBZone. That 
would happen, for example, with a service contract requiring the small 
business' employees and workers be present in a Government-owned or 
leased building. In the latter case, no less than 50 percent of the 
work must be performed by employees who reside in a HUBZone.
  Mr. President, the HUBZone Act of 1997 is designed to cut through 
Government redtape, while stressing a streamlined effort to place 
Government contracts and new jobs in economically distressed 
communities. Americans don't want another new law that creates a 
cottage industry of consultants necessary to fill out Government 
paperwork for a new Federal program.
  Many of my colleagues are familiar with SBA's 8(a) Minority Small 
Business Program and the sometimes cumbersome rules for small 
businesses seeking to qualify for the program. Typically, an applicant 
to the 8(a) program has to hire a lawyer to help prepare the 
application and shepherd it through SBA. The procedure can take months. 
In fact, Congress was forced to legislate the maximum time the agency 
could review an application in our last-ditch effort to speed up the 
process.
  The HUBZone Act of 1997 is specifically designed to avoid 
bureaucratic roadblocks that have delayed and discouraged small 
businesses from taking advantage of Government programs. Simply put, if 
you are a small business located in a HUBZone and you employ people 
from a HUBZone, at least 35 percent, then you are eligible. Once 
eligible, the small business notifies the SBA of its participation in 
the HUBZone program and is qualified to receive Federal Government 
contract benefits.

  My goal is to have new Government contracts being awarded to small 
businesses in economically distressed communities. Therefore, I have 
included some fairly ambitious goals for each Government agency to 
meet.
  In 1998, 1 percent of the total value of all prime Government 
contracts would be awarded to small businesses in HUBZones. The goal 
would increase to 2 percent in 1999, 3 percent in 2000 and 4 percent in 
the year 2001 and each succeeding year.
  HUBZone contracting is a bold undertaking. Passage of the HUBZone Act 
of 1997 will create more hope for inner cities with high unemployment, 
distressed rural communities where poverty and joblessness reign and 
have too long been ignored. Most importantly, passage of the HUBZone 
Act will create hope for hundreds of thousands of underemployed or 
unemployed who long ago thought our country had given up on them. The 
hope is tangible; the hope is for jobs and income.
  I think this bill can deliver. I soon hope to chair additional 
hearings before the Committee on Small Business on the HUBZone Act of 
1997 and the role our Nation's small business community can play in 
revitalizing our distressed cities and counties. I firmly believe the 
HUBZone proposal has great merit. I urge my colleagues to study this 
proposal and give me their comments. I ask for cosponsors and I ask for 
good ideas. There are many, many ideas which have been incorporated in 
this bill that were presented to me by colleagues, both on the Small 
Business Committee and elsewhere.
  I ask all of my colleagues, particularly if they are concerned about 
unemployment and underemployment in areas of their States--and I know 
of very few States that don't have that problem--I ask them to sit down 
with us and talk about how we can make this a better program. I would 
like to see it passed. I think it could provide a very significant 
boost and help get our country on the right track.
  I ask unanimous consent that the text of the bill and a section-by-
section analysis of the provisions be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 208

       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 ``HUBZone Act of 1997''.

     SEC. 2. HISTORICALLY UNDERUTILIZED BUSINESS ZONES.

       (a) Definitions.--Section 3 of the Small Business Act (15 
     U.S.C. 632) is amended by adding at the end the following:
       ``(o) Definitions Relating to Historically Underutilized 
     Business Zones.--In this section:
       ``(1) Historically underutilized business zone.--The term 
     `historically underutilized business zone' means any area 
     located within one or more qualified census tracts or 
     qualified nonmetropolitan counties.
       ``(2) Small business concern located in a historically 
     underutilized business zone.--The term `small business 
     concern located in a historically underutilized business 
     zone' means a small business concern--
       ``(A) that is owned and controlled by one or more persons, 
     each of whom is a United States citizen;
       ``(B) the principal office of which is located in a 
     historically underutilized business zone; and
       ``(C) not less than 35 percent of the employees of which 
     reside in a historically underutilized business zone.
       ``(3) Qualified areas.--
       ``(A) Qualified census tract.--The term `qualified census 
     tract' has the same meaning as in section 42(d)(5)(C)(i)(I) 
     of the Internal Revenue Code of 1986.
       ``(B) Qualified nonmetropolitan county.--The term 
     `qualified nonmetropolitan county' means, based on the most 
     recent data available from the Bureau of the Census of the 
     Department of Commerce, any county--
       ``(i) that is not located in a metropolitan statistical 
     area (as that term is defined in section 143(k)(2)(B) of the 
     Internal Revenue Code of 1986); and
       ``(ii) in which the median household income is less than 80 
     percent of the nonmetropolitan State median household income.
       ``(4) Qualified small business concern located in a 
     historically underutilized business zone.--
       ``(A) In general.--A small business concern located in a 
     historically underutilized business zone is `qualified', if--
       ``(i) the small business concern has certified in writing 
     to the Administrator that--

       ``(I) it is a small business concern located in a 
     historically underutilized business zone;
       ``(II) it will comply with the subcontracting limitations 
     specified in Federal Acquisition Regulation 52.219-14;

[[Page S732]]

       ``(III) in the case of a contract for services (except 
     construction), not less than 50 percent of the cost of 
     contract performance incurred for personnel will be expended 
     for employees of that small business concern or for employees 
     of other small business concerns located in historically 
     underutilized business zones; and
       ``(IV) in the case of a contract for procurement of 
     supplies (other than procurement from a regular dealer in 
     such supplies), the small business concern (or a 
     subcontractor of the small business concern that is also a 
     small business concern located in a historically 
     underutilized business zone) will perform work for not less 
     than 50 percent of the cost of manufacturing the supplies 
     (not including the cost of materials) in a historically 
     underutilized business zone; and

       ``(ii) no certification made by the small business concern 
     under clause (i) has been, in accordance with the procedures 
     established under section 30(c)(2)--

       ``(I) successfully challenged by an interested party; or
       ``(II) otherwise determined by the Administrator to be 
     materially false.

       ``(B) Change in percentages.--The Administrator may utilize 
     a percentage other than the percentage specified in under 
     subclause (III) or (IV) of subparagraph (A)(i), if the 
     Administrator determines that such action is necessary to 
     reflect conventional industry practices among small business 
     concerns that are below the numerical size standard for 
     businesses in that industry category.
       ``(C) Construction and other contracts.--The Administrator 
     shall promulgate final regulations imposing requirements that 
     are similar to those specified in subclauses (III) and (IV) 
     of subparagraph (A)(i) on contracts for general and specialty 
     construction, and on contracts for any other industry 
     category that would not otherwise be subject to those 
     requirements. The percentage applicable to any such 
     requirement shall be determined in accordance with 
     subparagraph (B).
       ``(D) List of qualified small business concerns.--The 
     Administrator shall establish and maintain a list of 
     qualified small business concerns located in historically 
     underutilized business zones, which list shall--
       ``(i) include the name, address, and type of business with 
     respect to each such small business concern;
       ``(ii) be updated by the Administrator not less than 
     annually; and
       ``(iii) be provided upon request to any Federal agency or 
     other entity.''.
       (b) Federal Contracting Preferences.--The Small Business 
     Act (15 U.S.C. 631 et seq.) is amended--
       (1) by redesignating section 30 as section 31; and
       (2) by inserting after section 29 the following:

     ``SEC. 30. HISTORICALLY UNDERUTILIZED BUSINESS ZONES PROGRAM.

       ``(a) In General.--There is established within the 
     Administration a program to be carried out by the 
     Administrator to provide for Federal contracting assistance 
     to qualified small business concerns located in historically 
     underutilized business zones in accordance with this section.
       ``(b) Contracting Preferences.--
       ``(1) Contract set-aside.--
       ``(A) Requirement.--The head of an executive agency shall 
     afford the opportunity to participate in a competition for 
     award of a contract of the executive agency, exclusively to 
     qualified small business concerns located in historically 
     underutilized business zones, if the Administrator determines 
     that--
       ``(i) it is reasonable to expect that not less than 2 
     qualified small business concerns located in historically 
     underutilized business zones will submit offers for the 
     contract; and
       ``(ii) the award can be made on the restricted basis at a 
     fair market price.
       ``(B) Covered contracts.--Subparagraph (A) applies to a 
     contract that is estimated to exceed the simplified 
     acquisition threshold.
       ``(2) Sole-source contracts.--
       ``(A) Requirement.--The head of an executive agency, in the 
     exercise of authority provided in any other law to award a 
     contract of the executive agency on a sole-source basis, 
     shall award the contract on that basis to a qualified small 
     business concern located in a historically underutilized 
     business zone, if any, that--
       ``(i) submits a reasonable and responsive offer for the 
     contract; and
       ``(ii) is determined by the Administrator to be a 
     responsible contractor.
       ``(B) Covered contracts.--Subparagraph (A) applies to a 
     contract that is estimated to exceed the simplified 
     acquisition threshold and not to exceed $5,000,000.
       ``(3) Price evaluation preference in full and open 
     competitions.--In any case in which a contract is to be 
     awarded by the head of an executive agency on the basis of 
     full and open competition, the price offered by a qualified 
     small business concern located in a historically 
     underutilized business zone shall be deemed as being lower 
     than the price offered by another offeror (other than another 
     qualified small business concern located in a historically 
     underutilized business zone) if the price offered by the 
     qualified small business concern located in a historically 
     underutilized business zone is not more than 10 percent 
     higher than the price offered by the other offeror.
       ``(4) Relationship to other contracting preferences.--
       ``(A) Subordinate relationship.--A procurement may not be 
     made from a source on the basis of a preference provided in 
     paragraph (1), (2), or (3) if the procurement would otherwise 
     be made from a different source under section 4124 or 4125 of 
     title 18, United States Code, or the Javits-Wagner-O'Day Act.
       ``(B) Superior relationship.--A procurement may not be made 
     from a source on the basis of a preference provided in 
     section 8(a), if the procurement would otherwise be made from 
     a different source under paragraph (1), (2), or (3) of this 
     subsection.
       ``(5) Definitions.--In this subsection, the terms 
     `executive agency', `full and open competition', and 
     `simplified acquisition threshold' have the meanings given 
     such terms in section 4 of the Office of Federal Procurement 
     Policy Act.
       ``(c) Enforcement; Penalties.--
       ``(1) In general.--The Administrator shall enforce the 
     requirements of this section.
       ``(2) Verification of eligibility.--In carrying out this 
     subsection, the Administrator shall establish procedures 
     relating to--
       ``(A) the filing, investigation, and disposition by the 
     Administration of any challenge to the eligibility of a small 
     business concern to receive assistance under this section 
     (including a challenge, filed by an interested party, 
     relating to the veracity of a certification made by a small 
     business concern under section 3(o)(4)(A)); and
       ``(B) verification by the Administrator of the accuracy of 
     any certification made by a small business concern under 
     section 3(o)(4)(A).
       ``(3) Random inspections.--The procedures established under 
     paragraph (2) may provide for random inspections by the 
     Administrator of any small business concern making a 
     certification under section 3(o)(4).
       ``(4) Provision of data.--Upon the request of the 
     Administrator, the Secretary of Labor and the Secretary of 
     Housing and Urban Development shall promptly provide to the 
     Administrator such information as the Administrator 
     determines to be necessary to carry out this subsection.
       ``(5) Penalties.--In addition to the penalties described in 
     section 16(d), any small business concern that is determined 
     by the Administrator to have misrepresented the status of 
     that concern as a `small business concern located in a 
     historically underutilized business zone' for purposes of 
     this section, shall be subject to the provisions of--
       ``(A) section 1001 of title 18, United States Code; and
       ``(B) sections 3729 through 3733 of title 31, United States 
     Code.''.

     SEC. 3. TECHNICAL AND CONFORMING AMENDMENTS TO THE SMALL 
                   BUSINESS ACT.

       (a) Performance of Contracts.--Section 8(d) of the Small 
     Business Act (15 U.S.C. 637(d)) is amended--
       (1) in paragraph (1)--
       (A) in the first sentence, by striking ``,, small business 
     concerns owned and controlled by socially and economically 
     disadvantaged individuals'' and inserting ``, qualified small 
     business concerns located in historically underutilized 
     business zones, small business concerns owned and controlled 
     by socially and economically disadvantaged individuals''; and
       (B) in the second sentence, by inserting ``qualified small 
     business concerns located in historically underutilized 
     business zones,'' after ``small business concerns,'';
       (2) in paragraph (3)--
       (A) by inserting ``qualified small business concerns 
     located in historically underutilized business zones,'' after 
     ``small business concerns,'' each place that term appears; 
     and
       (B) by adding at the end the following:
       ``(F) In this contract, the term `qualified small business 
     concern located in a historically underutilized business 
     zone' has the same meaning as in section 3(o) of the Small 
     Business Act.'';
       (3) in paragraph (4)--
       (A) in subparagraph (D), by inserting ``qualified small 
     business concerns located in historically underutilized 
     business zones,'' after ``small business concerns,''; and
       (B) in subparagraph (E), by striking ``small business 
     concerns and'' and inserting ``small business concerns, 
     qualified small business concerns located in historically 
     underutilized business zones, and'';
       (4) in paragraph (6), by inserting ``qualified small 
     business concerns located in historically underutilized 
     business zones,'' after ``small business concerns,'' each 
     place that term appears; and
       (5) in paragraph (10), by inserting ``qualified small 
     business concerns located in historically underutilized 
     business zones,'' after ``small business concerns,''.
       (b) Awards of Contracts.--Section 15 of the Small Business 
     Act (15 U.S.C. 644) is amended--
       (1) in subsection (g)(1)--
       (A) by inserting ``qualified small business concerns 
     located in historically underutilized business zones,'' after 
     ``small business concerns,'' each place that term appears; 
     and
       (B) by inserting after the second sentence the following: 
     ``The Governmentwide goal for participation by qualified 
     small business concerns located in historically underutilized 
     business zones shall be established at not less than 1 
     percent of the total value of all prime contract awards for 
     fiscal year 1998, not less than 2 percent of the total value 
     of all prime contract awards for fiscal year 1999, not less 
     than 3 percent of the total value of all prime contract 
     awards for fiscal year 2000, and not less than 4 percent of 
     the total value of all prime contract awards for

[[Page S733]]

     fiscal year 2001 and each fiscal year thereafter.'';
       (2) in subsection (g)(2)--
       (A) in the first sentence, by striking ``,, by small 
     business concerns owned and controlled by socially and 
     economically disadvantaged individuals'' and inserting ``, by 
     qualified small business concerns located in historically 
     underutilized business zones, by small business concerns 
     owned and controlled by socially and economically 
     disadvantaged individuals'';
       (B) in the second sentence, by inserting ``qualified small 
     business concerns located in historically underutilized 
     business zones,'' after ``small business concerns,''; and
       (C) in the fourth sentence, by striking ``by small business 
     concerns owned and controlled by socially and economically 
     disadvantaged individuals and participation by small business 
     concerns owned and controlled by women'' and inserting ``by 
     qualified small business concerns located in historically 
     underutilized business zones, by small business concerns 
     owned and controlled by socially and economically 
     disadvantaged individuals, and by small business concerns 
     owned and controlled by women''; and
       (3) in subsection (h), by inserting ``qualified small 
     business concerns located in historically underutilized 
     business zones,'' after ``small business concerns,'' each 
     place that term appears.
       (c) Offenses and Penalties.--Section 16 of the Small 
     Business Act (15 U.S.C. 645) is amended--
       (1) in subsection (d)(1)--
       (A) by inserting ``, a `qualified small business concern 
     located in a historically underutilized business zone','' 
     after `` `small business concern',''; and
       (B) in subparagraph (A), by striking ``section 9 or 15'' 
     and inserting ``section 9, 15, or 30''; and
       (2) in subsection (e), by inserting ``, a `small business 
     concern located in a historically underutilized business 
     zone','' after `` `small business concern',''.

     SEC. 4. OTHER TECHNICAL AND CONFORMING AMENDMENTS.

       (a) Title 10, United States Code.--Section 2323 of title 
     10, United States Code, is amended--
       (1) in subsection (a)(1)(A), by inserting before the 
     semicolon the following: ``, and qualified small business 
     concerns located in historically underutilized business zones 
     (as that term is defined in section 3(o) of the Small 
     Business Act)''; and
       (2) in subsection (f), by inserting ``or as a qualified 
     small business concern located in a historically 
     underutilized business zone (as that term is defined in 
     section 3(o) of the Small Business Act)'' after ``subsection 
     (a))''.
       (b) Federal Home Loan Bank Act.--Section 21A(b)(13) of the 
     Federal Home Loan Bank Act (12 U.S.C. 1441a(b)(13)) is 
     amended--
       (1) by striking ``concerns and small'' and inserting 
     ``concerns, small''; and
       (2) by inserting ``, and qualified small business concerns 
     located in historically underutilized business zones (as that 
     term is defined in section 3(o) of the Small Business Act)'' 
     after ``disadvantaged individuals''.
       (c) Small Business Economic Policy Act of 1980.--Section 
     303(e) of the Small Business Economic Policy Act of 1980 (15 
     U.S.C. 631b(e)) is amended--
       (1) in paragraph (1), by striking ``and'' at the end;
       (2) in paragraph (2), by striking the period at the end and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(3) qualified small business concerns located in 
     historically underutilized business zones (as that term is 
     defined in section 3(o) of the Small Business Act).''.
       (d) Small Business Investment Act of 1958.--Section 
     411(c)(3)(B) of the Small Business Investment Act of 1958 (15 
     U.S.C. 694b(c)(3)(B)) is amended by inserting before the 
     semicolon the following: ``, or to a qualified small business 
     concern located in a historically underutilized business 
     zone, as that term is defined in section 3(o) of the Small 
     Business Act''.
       (e) Title 31, United States Code.--
       (1) Contracts for collection services.--Section 3718(b) of 
     title 31, United States Code, is amended--
       (A) in paragraph (1)(B), by inserting ``and law firms that 
     are qualified small business concerns located in historically 
     underutilized business zones (as that term is defined in 
     section 3(o) of the Small Business Act)'' after 
     ``disadvantaged individuals''; and
       (B) in paragraph (3)--
       (i) in the first sentence, by inserting before the period 
     ``and law firms that are qualified small business concerns 
     located in historically underutilized business zones'';
       (ii) in subparagraph (A), by striking ``and'' at the end;
       (iii) in subparagraph (B), by striking the period at the 
     end and inserting ``; and''; and
       (iv) by adding at the end the following:
       ``(C) the term `qualified small business concern located in 
     a historically underutilized business zone' has the same 
     meaning as in section 3(o) of the Small Business Act.''.
       (2) Payments to local governments.--Section 6701(f) of 
     title 31, United States Code, is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (A), by striking ``and'' at the end;
       (ii) in subparagraph (B), by striking the period at the end 
     and inserting ``; and''; and
       (iii) by adding at the end the following:
       ``(C) qualified small business concerns located in 
     historically underutilized business zones.''; and
       (B) in paragraph (3)--
       (i) in subparagraph (A), by striking ``and'' at the end;
       (ii) in subparagraph (B), by striking the period at the end 
     and inserting ``; and''; and
       (iii) by adding at the end the following:
       ``(C) the term `qualified small business concern located in 
     a historically underutilized business zone' has the same 
     meaning as in section 3(o) of the Small Business Act (15 
     U.S.C. 632(o)).''.
       (3) Regulations.--Section 7505(c) of title 31, United 
     States Code, is amended by striking ``small business concerns 
     and'' and inserting ``small business concerns, qualified 
     small business concerns located in historically underutilized 
     business zones, and''.
       (f) Office of Federal Procurement Policy Act.--
       (1) Enumeration of included functions.--Section 6(d) of the 
     Office of Federal Procurement Policy Act (41 U.S.C. 405(d)) 
     is amended--
       (A) in paragraph (11), by inserting ``qualified small 
     business concerns located in historically underutilized 
     business zones (as that term is defined in section 3(o) of 
     the Small Business Act),'' after ``small businesses,''; and
       (B) in paragraph (12), by inserting ``qualified small 
     business concerns located in historically underutilized 
     business zones (as that term is defined in section 3(o) of 
     the Small Business Act (15 U.S.C. 632(o)),'' after ``small 
     businesses,''.
       (2) Procurement data.--Section 19A of the Office of Federal 
     Procurement Policy Act (41 U.S.C. 417a) is amended--
       (A) in subsection (a)--
       (i) by inserting ``the number of qualified small business 
     concerns located in historically underutilized business 
     zones,'' after ``Procurement Policy''; and
       (ii) by inserting a comma after ``women''; and
       (B) in subsection (b), by adding at the end the following: 
     ``In this section, the term `qualified small business concern 
     located in a historically underutilized business zone' has 
     the same meaning as in section 3(o) of the Small Business Act 
     (15 U.S.C. 632(o)).''.
       (g) Energy Policy Act of 1992.--Section 3021 of the Energy 
     Policy Act of 1992 (42 U.S.C. 13556) is amended--
       (1) in subsection (a)--
       (A) in paragraph (2), by striking ``or'';
       (B) in paragraph (3), by striking the period and inserting 
     ``; or''; and
       (C) by adding at the end the following:
       ``(4) qualified small business concerns located in 
     historically underutilized business zones.''; and
       (2) in subsection (b), by adding at the end the following:
       ``(3) The term `qualified small business concern located in 
     a historically underutilized business zone' has the same 
     meaning as in section 3(o) of the Small Business Act (15 
     U.S.C. 632(o)).''.
       (h) Title 49, United States Code.--
       (1) Project grant application approval conditioned on 
     assurances about airport operation.--Section 47107(e) of 
     title 49, United States Code, is amended--
       (A) in paragraph (1), by inserting before the period ``or 
     qualified small business concerns located in historically 
     underutilized business zones (as that term is defined in 
     section 3(o) of the Small Business Act)'';
       (B) in paragraph (4)(B), by inserting before the period 
     ``or as a qualified small business concern located in a 
     historically underutilized business zone (as that term is 
     defined in section 3(o) of the Small Business Act)''; and
       (C) in paragraph (6), by inserting ``or a qualified small 
     business concern located in a historically underutilized 
     business zone (as that term is defined in section 3(o) of the 
     Small Business Act)'' after ``disadvantaged individual''.
       (2) Minority and disadvantaged business participation.--
     Section 47113 of title 49, United States Code, is amended--
       (A) in subsection (a)--
       (i) in paragraph (1), by striking the period at the end and 
     inserting a semicolon;
       (ii) in paragraph (2), by striking the period at the end 
     and inserting ``; and''; and
       (iii) by adding at the end the following:
       ``(3) the term `qualified small business concern located in 
     a historically underutilized business zone' has the same 
     meaning as in section 3(o) of the Small Business Act (15 
     U.S.C. 632(o)).''; and
       (B) in subsection (b), by inserting before the period ``or 
     qualified small business concerns located in historically 
     underutilized business zones''.

   Historically Underutilized Business Zone Act of 1997-- Section-by-
                            Section Analysis


                         SECTION 1. SHORT TITLE

       Historically Underutilized Business Zone Act of 1997, 
     hereinafter referred to as the ``HUBZone Act of 1997.''


          SECTION 2. HISTORICALLY UNDERUTILIZED BUSINESS ZONES

                              Definitions

       Historically Underutilized Business Zone (HUBZone) is any 
     area located within a qualified metropolitan statistical area 
     or qualified non-metropolitan area.
       Small business concern located in a Historically 
     Underutilized Business Zone is a small business whose 
     principal office is located in a HUBZone and whose workforce 
     includes at least 35% of its employees from one or more 
     HUBZones.

[[Page S734]]

       Qualified Metropolitan Statistical Area is an area where 
     not less than 50% of the households have an income of less 
     than 60% of the metropolitan statistical area median gross 
     income as determined by the Department of Housing and Urban 
     Development.
       Qualified Non-metropolitan Area is an area where the 
     household income is less than 80% of the non-metropolitan 
     area median gross income as determined by the Bureau of the 
     Census of the Department of Commerce.
       Qualified Small Business Concern must certify in writing to 
     the Small Business Administration (SBA) that it (a) is 
     located in a HUBZone, (b) will comply with subcontracting 
     rules in the Federal Acquisition Regulations (FAR), (c) will 
     insure that not less than 50% of the contract cost will be 
     performed by the Qualified Small Business.

                        Contracting Preferences

       Contract Set-Aside to a qualified small business located in 
     a HUBZone can be made by a procuring agency if it determines 
     that 2 or more qualified small businesses will submit offers 
     for the contract and the award can be made at a fair market 
     price.
       Sole-source Contracts can be awarded if a qualified small 
     business submits a reasonable and responsive offer and is 
     determined by SBA to be a responsible contractor. Sole-source 
     contracts cannot exceed $5 million.
       10% Price Evaluation Preference in full and open 
     competition can be made on behalf of the Qualified Small 
     Business if its offer is not more than 10% higher than the 
     other offeror, so long as it is not a small business concern.

                         Enforcement; Penalties

       The SBA Administrator or his designee shall establish a 
     system to verify certifications made by HUBZone small 
     businesses to include random inspections and procedures 
     relating to disposition of any challenges to the accuracy of 
     any certification. If SBA determines that a small business 
     concern may have misrepresented its status as a HUBZone small 
     business, it shall be subject to prosecution under title 18, 
     section 1001, U.S.C., False Certifications, and title 31, 
     sections 3729-3733, U.S.C., False Claims Act.


 SECTION 3. TECHNICAL AND CONFORMING AMENDMENTS TO THE SMALL BUSINESS 
                                  ACT

                           HUBZone Preference

       The Small Business Act is amended to give qualified small 
     business concerns located in HUBZones a higher preference 
     than small business concerns owned and controlled by socially 
     and economically disadvantaged individuals (8(a) 
     contractors).

                             HUBZone Goals

       This section sets forth government-wide goals for awarding 
     government contracts to qualified small businesses. In Fiscal 
     Year 1998, the goal will be not less than 1% of the total 
     value of all prime contracts awarded to qualified small 
     businesses located in HUBZones. In FY 1999, this goal will 
     increase to 2%, in FY 2000, it will be 3%; and it will reach 
     4% in FY 2001 and each year thereafter.

                         Offenses and Penalties

       This section provides that anyone who misrepresents any 
     entity as being a qualified small business in order to obtain 
     a government contract or subcontract can be fined up to 
     $500,000 and imprisoned for not more than 10 years and be 
     subject to the administrative remedies prescribed by the 
     Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801-
     3812).


           SEC. 4. OTHER TECHNICAL AND CONFORMING AMENDMENTS

       This section makes technical amendments to other federal 
     government agency programs that have traditionally provided 
     contract set asides and preferences to disadvantaged small 
     businesses by expanding each program to include small 
     businesses located in an Historically Underutilized Business 
     Zone.
                                 ______