[Congressional Record Volume 148, Number 23 (Wednesday, March 6, 2002)]
[Senate]
[Pages S1612-S1613]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself and Mr. Bond):
  S. 1994. A bill to establish a priority preference among certain 
small business concerns for purposes of Federal contracts, and for 
other purposes; to the Committee on Small Business and 
Entrepreneurship.
  Mr. KERRY. Madam President, today I am introducing legislation to 
help our nation's 8(a) Business Development, BD, and HUBZone firms 
compete more effectively in the Federal marketplace.
  This bipartisan legislation, cosponsored by Senator Kit Bond, stems 
from a 1997 commitment Senator Bond and I made to each other to seek 
equality between the Small Business Administration's, SBA, 8(a)BD 
program and the HUBZone program.
  Much has been made lately of the SBA's proposed rule to establish 
``parity'' or equality between these two important programs. Some in 
the contracting community have opposed the proposed rule because they 
have concerns about the decline in the number of contracts and contract 
dollar values being awarded to 8(a)BD firms. I share the concerns of 
the contracting community in this regard, but I do not blame the 
HUBZone program for this decline. Rather, I blame the current 
procurement environment.
  In 1997, working with then-Chairman of the Senate Committee on Small 
Business, Senator Bond, I took the necessary steps to protect the 
8(a)BD program. In my negotiations with Senator Bond, he agreed to 
change the legislation creating the HUBZone program from one of HUBZone 
priority to one of equality between the 8(a)BD and HUBZone programs. 
Further, we negotiated a 3 percent increase in the Federal Government's 
small business goal, raising it from 20 percent to 23 percent, in order 
to accommodate the HUBZone program, which when fully phased in for 
Fiscal Year 2003 will have a 3 percent governmentwide goal. This 
increase was put in place specifically to accommodate the HUBZone 
program and ensure that 8(a)BD firms did not lose Federal contracts to 
the HUBZone program.
  The fact remains, however, despite these protections, that 8(a)BD 
firms are experiencing a decline in Federal procurement, which some 
place as high as 34 percent since 1997. The cause of this decline has 
its roots in the new procurement environment created by the reforms in 
the mid-1990s, such as passage of the Federal Acquisition Streamlining 
Act and the Federal Acquisition Reform Act, the regulatory changes to 
procurement programs in response to the Adarand Inc. v. Pena decision, 
and reductions in the acquisition workforce. Because negative trends 
hit minority-owned firms first and hardest, these small businesses have 
borne a disproportionate share of the percentage decline in Federal 
contract dollars being awarded to small businesses.
  To help combat the negative effects of procurement reform, I have 
been taking a very close look at the SBA's programs to assist small 
businesses, especially small businesses owned by socially and 
economically disadvantaged individuals. The legislation being 
introduced today is the first step in halting and reversing the decline 
brought about by procurement reform.
  This legislation specifically addresses two critical areas of the 
8(a)BD and HUBZone programs. The first deals with the relationship 
between the two programs when a small business has received both an 
8(a)BD and a HUBZone certification, the second deals with the sole-
source threshold issue for these firms.
  First, an important factor in my decision to support the HUBZone 
legislation with the negotiated changes to protect the 8(a)BD program 
was the concept known as ``super-priority'' or ``priority-preference.'' 
The priority-preference stems from Congressional intent that firms that 
are both 8(a)BD and HUBZone certified receive a preference over a firm 
that has a certification in only one program. In addition, the 
priority-preference was intended to allow these firms to combine the 
price evaluation preference available to them under each program, with 
the understanding that any offeror would still need to meet a 
``responsiveness'' test in terms of their offer. Unfortunately, the new 
rule proposed by the SBA does not include the priority-preference, and 
the SBA has issued guidance that states that the priority-preference 
has no statutory provision to support its creation.
  Although I strongly disagree with the SBA's decision to end the 
priority-preference, this legislation will rectify the situation by 
creating a statutory priority-preference for firms that have both an 
8(a)BD and a HUBZone certification. Such a provision will help combine 
the benefits of each program and bring additional jobs and 
opportunities to underdeveloped areas. I view this provision as a win-
win for the 8(a)BD and HUBZone contracting communities.
  Second, this legislation makes an important update to both the 8(a)BD 
and HUBZone programs by raising the sole-source thresholds. One of the 
most important attributes of both of these programs is the authority 
for small businesses to receive contracts on a sole-source basis. This 
excellent benefit is limited, however, by a cap on the dollar amount 
for sole-source contracts. Currently, contracts for goods and services 
are limited to $3 million, while manufacturing contracts are limited to 
$5 million. This legislation updates those limits by $1 million for 
each category--an update that has been needed for some time and that 
Senator Bond and I nearly succeeded in including in the Small Business 
Reauthorization Act of 2000. By increasing the sole-source thresholds, 
the Federal government will immediately put more contract dollars into 
the hands of 8(a)BD and HUBZone firms.
  As I mentioned earlier in my statement, this legislation is merely 
one step in the process to help reverse the negative trends procurement 
reform has had on our nation's small businesses.
  It is my hope that we can move this legislation through the Senate 
quickly, and I would urge all of my colleagues to lend their support.

[[Page S1613]]

  Mr. BOND. Mr. President, I appreciate the opportunity to come to the 
Floor once again on another bipartisan matter with the distinguished 
chairman of the Small Business Committee. We have such a constructive 
working relationship in the Federal procurement issue area, and I 
always welcome the opportunity to work with the Senator from 
Massachusetts, Mr. Kerry, to advance small business participation in 
Government contracting.
  This bill we are introducing today will further clarify the 
relationship between the HUBZone and 8(a) contracting programs. This 
relationship has been a strongly debated topic lately, although we 
thought our Committee provided clear guidance on the matter in the 1997 
HUBZone Act. In the matter before us, we are clarifying what happens 
when firms are eligible for both programs and become certified.
  The original Small Business Administration regulations on the HUBZone 
program called for the highest contracting priority to be given to 
HUBZone 8(a) ``dual status'' firms. That is, if a firm has been 
certified in both programs, it moves to the head of the class in 
getting Government contracts. The HUBZone regulations said that, in a 
HUBZone set-aside, an 8(a) firm should win over non-8(a) firms. 
Unfortunately, a comparable change was not included in the 8(a) 
regulations, to give HUBZone firms a preference in 8(a) set-asides. In 
a letter to SBA's Acting General Counsel last year, I asked SBA to 
resolve this inconsistency.
  Robert Gangwere, the Acting General Counsel, stated he did not think 
SBA had the statutory authority to grant a ``superpreference'' to 
HUBZone 8(a) dual status firms. Currently, SBA has a proposed 
rulemaking in progress that deletes the ``superpreference'' language.
  This bill would restore that. In a HUBZone set-aside (a competition 
restricted only to firms that are HUBZone firms), an 8(a) bidder would 
have priority over non-8(a) HUBZone bidders. A comparable change would 
be made in the 8(a) set-aside, giving HUBZone firms priority. I think 
this is reasonable, in that it encourages firms to take advantage of 
both programs.
  I do have one reservation with this bill. Both the HUBZone program 
and the Small Disadvantaged Business program, of which 8(a) is a part, 
offer a 10 percent price evaluation preference under certain 
circumstances in full-and-open competition. The old SBA rules called 
for HUBZone 8(a) combined firms to get a 20 percent price evaluation 
preference, combining both the HUBZone preference and the Small 
Disadvantaged Business preference. I think 20 percent is excessive.
  One of the goals of the small business program is to try to help 
small firms stabilize and develop, so they can survive in a competitive 
marketplace. Government contracts are supposed to be a means toward 
that end. But if a firm requires a 20 percent preference to win a 
contract, it probably has not done what it needs to do to become 
efficient and ready for the competitive marketplace. I am concerned 
that a 20 percent preference will be an unreasonable subsidy for 
inefficient firms. If a small business bidder is not even able to get 
within 20 percent of the lowest bidder, it probably is not a viable 
enterprise, and subsidizing its existence is not the highest and best 
use of taxpayer monies.
  With that reservation, I am happy to cosponsor this measure with the 
Senator from Massachusetts. I am confident we can come to some kind of 
accommodation on the price evaluation preference, and look forward to 
working with him to do so.
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