[Congressional Record Volume 156, Number 84 (Monday, June 7, 2010)]
[Senate]
[Pages S4623-S4625]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. LANDRIEU (for herself and Mr. Cardin):
  S. 3458. A bill to improve the program under section 8(a) of the 
Small Business Act and to establish a surety bond pilot program; to the 
Committee on Small Business and Entrepreneurship.
  Ms. LANDRIEU. Mr. President, along with my distinguished colleague 
Senator Benjamin Cardin of Maryland, I rise today to introduce the 
Section 8(a) Improvements Act of 2010. As the Chair of the Committee on 
Small Business and Entrepreneurship, I have held a number of hearings 
and roundtables on the issues affecting small businesses that contract 
with the Federal Government. The Committee has repeatedly heard from 
small businesses throughout the country that more needs to be done to 
level the playing field and help our small businesses win Federal 
contracts. The legislation that I am introducing today seeks to improve 
access to Federal contracts for small businesses, particularly for 
socially and economically disadvantaged small businesses. It also 
represents the third in a series of steps that the Committee is taking 
to address the disparities and inequalities that currently exist in the 
Federal procurement process.
  As I have explained in previous statements before this chamber, as 
the largest purchaser in the world, the Federal Government is uniquely 
positioned to offer new and reliable business opportunities for our 
small firms. Government contracts are one of the easiest and most 
inexpensive ways the government can help to immediately increase sales 
for America's entrepreneurs, leading to the creation of new jobs and 
helping to move our economy forward. When large businesses get 
government contracts, they are able to absorb that new work into their 
existing workforce. When small businesses get government work they must 
``staff up'' to meet the increased demand. By increasing contracts to 
small businesses by just 1 percent, we can create more than 100,000 new 
jobs. Today, we need those jobs more than ever.
  But the reality is that small businesses need all the help they can 
get when it comes to accessing Federal contracts. Small businesses face 
significant challenges in competing for these opportunities, including 
a maze of complicated regulations, contract bundling issues, size 
standards with loopholes for big businesses, and a lack of protections 
for sub-contractors. Despite the fact that Federal agencies have a 
statutory goal to spend 23 percent of their contract dollars on 
contracts to small firms, in recent years the government has often 
fallen short.
  For example, according to the Federal Procurement Data System, in 
fiscal year 2007 the Federal Government missed its 23 percent 
contracting goal by .992 percent. That .992 percent doesn't sound like 
much, but in reality it represents more than $3.74 billion and 93,500 
jobs lost for small businesses. In fiscal year 2008, the Federal 
Procurement Data System reported that the government missed its goal by 
1.51 percent, meaning more than $6.51 billion and 162,700 jobs lost for 
our small businesses. At a time when more than 15 million Americans are 
still out of work, merely meeting that 23 percent goal could mean food 
on the table for a family struggling to make ends meet.
  Clearly we need to do better when it comes to helping our small 
businesses access Federal contracting opportunities. Even under the 
best of circumstances our small businesses face significant challenges 
when seeking Federal contracting opportunities. But these challenges 
are further compounded for small businesses that face additional 
obstacles, particularly those that are socially and economically 
disadvantaged.
  The Section 8(a) Improvements Act of 2010 attempts to help socially 
and economically disadvantaged firms in three ways. First, it makes 
long overdue and much needed adjustments to the average annual income 
and net worth thresholds currently in place. Since the establishment of 
the 8(a) program over 30 years ago, these thresholds have not been 
significantly updated to account for inflation, placing unrealistic 
limits on the number of small businesses that are eligible to 
participate in the program.
  Additionally, this legislation requires the SBA to establish maximum 
net worth thresholds for socially and economically disadvantaged small 
businesses working in the manufacturing, construction, professional 
services, and general services industries. Small businesses working in 
these industries simply face different business conditions as well as 
higher business costs, which prevent them from participating in the 
8(a) program. Making this simple fix will open the program up to a wide 
array of qualified small businesses.
  Secondly, this legislation builds upon the previously mentioned 
adjustments to the net worth and income thresholds, by extending the 
amount of time under which a business can participate in the program. 
For all of the success that many small businesses experience while 
participating in the program, upon graduation as many as 70 percent see 
their businesses fail within several years. By establishing a 
transition period, businesses that have graduated from the program can 
continue receiving developmental assistance for up to 3 years after 
graduation, providing them with much needed stability as they seek to 
transition their business operations.
  The third way this legislation attempts to improve contracting 
opportunities for small businesses is through the creation of a Surety 
Bond Pilot Program. Under the program, the SBA can guarantee 90 percent 
of surety bonds, protecting small businesses against any loss resulting 
from a breach of the terms on a bond. To supplement the guarantee and 
help put these small businesses in a stronger position to succeed upon 
graduation from the 8(a) program, the legislation also requires the SBA 
to provide educational training and technical assistance on a wide 
range of topics. Finally, the legislation establishes a revolving fund 
to support the program, and also creates an advisory board to oversee 
and evaluate the effectiveness and performance of the program.
  It is well past time to provide greater opportunities for the 
thousands of

[[Page S4624]]

small business owners who wish to do business with the Federal 
Government. The Section 8(a) Improvements Act of 2010 represents 
another significant step towards opening those doors of opportunity, 
especially for those small businesses that need a little more help. I 
thank Senator Cardin for his leadership on this issue, and I hope that 
all of my colleagues will join us in supporting this important 
legislation as we work to bring it to the President's desk in the 
coming months.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3458

       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 ``Section 8(a) Improvements 
     Act of 2010''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) Despite the significant progress businesses owned by 
     socially and economically disadvantaged individuals have made 
     as a result of the business development program under section 
     8(a) of the Small Business Act (15 U.S.C. 637(a)), such 
     businesses remain subject to discrimination that creates 
     substantial barriers to success in the marketplace. The 
     business development program under section 8(a) of the Small 
     Business Act reflects the commitment of the Nation to 
     eradicating discriminatory barriers to the formation and 
     development of viable businesses by socially and economically 
     disadvantaged individuals.
       (2) Recent evidence presented in Congressional hearings, 
     roundtables, and academic studies demonstrates, among other 
     things, the following:
       (A) Significant disparities still exist between the number, 
     size, and income of businesses owned by socially and 
     economically disadvantaged individuals and other businesses. 
     These disparities remain even after controlling for factors 
     such as industry, geography, education, age, and labor market 
     status.
       (B) Discrimination still limits the ability of socially and 
     economically disadvantaged individuals to access capital. 
     Socially and economically disadvantaged individuals are more 
     often denied loans than individuals who are not minorities, 
     and often pay higher rates of interest on small business 
     loans.
       (C) Socially and economically disadvantaged individuals who 
     own businesses often experience--
       (i) discrimination from prime contractors and exclusion 
     from critical business networks; and
       (ii) discrimination by bonding companies and suppliers that 
     impedes the ability of the businesses to compete equally for 
     Government contracts.

     SEC. 3. DEFINITIONS.

       In this Act, the terms ``Administration'' and 
     ``Administrator'' means the Small Business Administration and 
     the Administrator thereof, respectively.

     SEC. 4. PROGRAMS FOR SOCIALLY AND ECONOMICALLY DISADVANTAGED 
                   SMALL BUSINESS CONCERNS.

       (a) Net Worth Threshold.--
       (1) In general.--Section 8(a)(6)(A) of the Small Business 
     Act (15 U.S.C. 637(a)(6)(A)) is amended--
       (A) by inserting ``(i)'' after ``(6)(A)'';
       (B) by striking ``In determining the degree of diminished 
     credit'' and inserting the following:
       ``(ii)(I) In determining the degree of diminished credit'';
       (C) by striking ``In determining the economic 
     disadvantage'' and inserting the following:
       ``(iii) In determining the economic disadvantage''; and
       (D) by inserting after clause (ii)(I), as so designated by 
     this section, the following:
       ``(II)(aa) Not later than 1 year after the date of 
     enactment of the Section 8(a) Improvements Act of 2010, the 
     Administrator shall--
       ``(AA) assign each North American Industry Classification 
     System industry code to a category described in item (cc); 
     and
       ``(BB) for each category described in item (cc), establish 
     a maximum net worth for the socially disadvantaged 
     individuals who own or control small business concerns in the 
     category that participate in the program under this 
     subsection.
       ``(bb) The maximum net worth for a category described in 
     item (cc) shall be not less than the modified net worth 
     limitations established by the Administrator under section 
     4(a)(2) of the Section 8(a) Improvements Act of 2010.
       ``(cc) The categories described in this item are--
       ``(AA) manufacturing;
       ``(BB) construction;
       ``(CC) professional services; and
       ``(DD) general services.
       ``(III) The Administrator shall establish procedures that--
       ``(aa) account for inflationary adjustments to, and include 
     a reasonable assumption of, the average income and net worth 
     of the owners of business concerns that are dominant in the 
     field of operation of the business concern; and
       ``(bb) require an annual inflationary adjustment to the 
     average income and maximum net worth requirements under this 
     clause.
       ``(IV) In determining the assets and net worth of a 
     socially disadvantaged individual under this subparagraph, 
     the Administrator shall not consider any assets of the 
     individual that are held in a qualified retirement plan, as 
     that term is defined in section 4974(c) of the Internal 
     Revenue Code of 1986.''.
       (2) Temporary inflationary adjustment.--
       (A) In general.--Not later than 30 days after the date of 
     enactment of this Act, the Administrator shall modify the net 
     worth limitations established by the Administrator for 
     purposes of the program under section 8(a) of the Small 
     Business Act (15 U.S.C. 637(a)) by adjusting the amount of 
     the net worth limitations for inflation during the period 
     beginning on the date on which the Administrator established 
     the net worth limitations and the date of enactment of this 
     Act.
       (B) Termination.--The Administrator shall apply the net 
     worth limitations established under subparagraph (A) until 
     the effective date of the net worth limitations established 
     by the Administrator under clause (ii)(II) of section 
     8(a)(6)(A) of the Small Business Act (15 U.S.C. 
     637(a)(6)(A)), as added by this subsection.
       (b) Transition Period.--Section 7(j)(15) of the Small 
     Business Act (15 U.S.C. 636(j)(15)) is amended--
       (1) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii), respectively;
       (2) by striking ``Subject to'' and inserting ``(A) Except 
     as provided in subparagraph (B), and subject to''; and
       (3) by adding at the end the following:
       ``(B)(i) A small business concern may receive developmental 
     assistance under the Program and contracts under section 8(a) 
     during the 3-year period beginning on the date on which the 
     small business concern graduates--
       ``(I) because the small business concern has participated 
     in the Program for the total period authorized under 
     subparagraph (A); or
       ``(II) under section 8(a)(6)(C)(ii), because the socially 
     disadvantaged individuals who own or control the small 
     business concern have a net worth that is more than the 
     maximum net worth established by the Administrator.
       ``(ii) After the end of the 3-year period described in 
     clause (i), a small business concern described in clause 
     (i)--
       ``(I) may not receive developmental assistance under the 
     Program or contracts under section 8(a); and
       ``(II) may continue to perform and receive payment under a 
     contract received by the small business concern under section 
     8(a) before the end of the period, under the terms of the 
     contract.''.
       (c) GAO Study.--Section 8(a) of the Small Business Act (15 
     U.S.C. 637(a)) is amended by adding at the end the following:
       ``(22) Review of effectiveness.--
       ``(A) GAO study.--Not later than 5 years after the date of 
     enactment of this paragraph, and every 5 years thereafter, 
     the Comptroller General of the United States shall--
       ``(i) conduct an evaluation of the effectiveness of the 
     program under this subsection, including an examination of--
       ``(I) the number and size of contracts applied for, as 
     compared to the number received by, small business concerns 
     after successfully completing the program;
       ``(II) the percentage of small business concerns that 
     continue to operate during the 3-year period beginning on the 
     date on which the small business concerns successfully 
     complete the program;
       ``(III) whether the business of small business concerns 
     increases during the 3-year period beginning on the date on 
     which the small business concerns successfully complete the 
     program; and
       ``(IV) the number of training sessions offered under the 
     program; and
       ``(ii) submit to the Committee on Small Business and 
     Entrepreneurship of the Senate and the Committee on Small 
     Business of the House of Representatives a report regarding 
     each evaluation under clause (i).
       ``(B) SBA report.--Not later than 1 year after the date of 
     enactment of this paragraph, and every year thereafter, the 
     Administrator shall submit to the Committee on Small Business 
     and Entrepreneurship of the Senate and the Committee on Small 
     Business of the House of Representatives a report evaluating 
     the program under this section, including an assessment of--
       ``(i) the regulations promulgated to carry out the program;
       ``(ii) online training under the program; and
       ``(iii) whether the structure of the program is conducive 
     to business development.''.

     SEC. 5. SURETY BOND PILOT PROGRAM.

       (a) Definitions.--In this section--
       (1) the terms ``bid bond'', ``payment bond'', ``performance 
     bond'', and ``surety'' have the meanings given those terms in 
     section 410 of the Small Business Investment Act of 1958 (15 
     U.S.C. 694a);
       (2) the term ``Board'' means the pilot program advisory 
     board established under subsection (d)(1);
       (3) the term ``eligible small business concern'' means a 
     socially and economically disadvantaged small business 
     concern that is

[[Page S4625]]

     participating in the program under section 8(a) of the Small 
     Business Act (15 U.S.C. 637(a));
       (4) the term ``Fund'' means the Small Business Surety Bond 
     Pilot Program Fund established under subsection (e)(1);
       (5) the term ``graduated'' has the meaning given that term 
     in section 7(j)(10)(H) of the Small Business Act (15 U.S.C. 
     636(j)(10)(H));
       (6) the term ``pilot program'' means the surety bond pilot 
     program established under subsection (b)(1); and
       (7) the term ``socially and economically disadvantaged 
     small business concern'' has the meaning given that term in 
     section 8(a) of the Small Business Act (15 U.S.C. 637(a)).
       (b) Program.--
       (1) In general.--The Administrator shall establish a surety 
     bond pilot program under which the Administrator may 
     guarantee any surety against loss resulting from a breach of 
     the terms of a bid bond, payment bond, performance bond, or 
     bonds ancillary thereto, by an eligible small business 
     concern.
       (2) Guarantee percentage.--A guarantee under the pilot 
     program shall obligate the Administration to pay to a surety 
     90 percent of the loss incurred and paid by the surety.
       (3) Application.--An eligible small business concern 
     desiring a guarantee under the pilot program shall submit an 
     application at such time, in such manner, and accompanied by 
     such information as the Administrator may require.
       (4) Review.--A surety desiring a guarantee under the pilot 
     program against loss resulting from a breach of the terms of 
     a bid bond, payment bond, performance bond, or bonds 
     ancillary thereto by an eligible small business concern 
     shall--
       (A) submit to the Administrator a report evaluating whether 
     the eligible small business concern meets such criteria as 
     the Administrator may establish relating to whether a bond 
     should be issued to the eligible small business concern; and
       (B) if the Administrator does not guarantee the surety 
     against loss, submit an update of the report described in 
     subparagraph (A) every 6 months.
       (c) Technical Assistance and Educational Training.--
       (1) In general.--The Administrator shall provide technical 
     assistance and educational training to an eligible small 
     business concern participating in the pilot program or 
     desiring to participate in the pilot program for a period of 
     not less than 3 years, to promote the growth of the eligible 
     small business concern and assist the eligible small business 
     concern in promoting job development.
       (2) Topics.--
       (A) Technical assistance.--The technical assistance under 
     paragraph (1) shall include assistance relating to--
       (i) scheduling of employees;
       (ii) cash flow analysis;
       (iii) change orders;
       (iv) requisition preparation;
       (v) submitting proposals;
       (vi) dispute resolution; and
       (vii) contract management.
       (B) Educational training.--The educational training under 
     paragraph (1) shall include training regarding--
       (i) accounting;
       (ii) legal issues;
       (iii) infrastructure;
       (iv) human resources;
       (v) estimating costs;
       (vi) scheduling; and
       (vii) any other area the Administrator determines is a key 
     area for which training is needed for eligible small business 
     concerns.
       (d) Panel.--
       (1) Establishment.--The Administrator shall establish a 
     pilot program advisory board to evaluate and make 
     recommendations regarding the pilot program.
       (2) Membership.--The Board shall be composed of 5 members--
       (A) who shall be appointed by the Administrator;
       (B) not less than 2 of whom shall have graduated from the 
     program under section 8(a) of the Small Business Act (15 
     U.S.C. 637(a)); and
       (C) not more than 1 of whom may be an officer or employee 
     of the Administration.
       (3) Duties.--The Board shall--
       (A) evaluate and make recommendations to the Administrator 
     regarding the effectiveness of the pilot program;
       (B) make recommendations to the Administrator regarding 
     performance measures to evaluate eligible small business 
     concerns applying for a guarantee under the pilot program; 
     and
       (C) not later than 90 days after the date on which all 
     members of the Board are appointed, and every year thereafter 
     until the authority to carry out the pilot program terminates 
     under subsection (f), submit to the Committee on Small 
     Business and Entrepreneurship of the Senate and the Committee 
     on Small Business of the House of Representatives a report 
     regarding the activities of the Board.
       (e) Fund.--
       (1) Establishment of fund.--There is established in the 
     Treasury of the United States a revolving fund to be known as 
     the ``Small Business Surety Bond Pilot Program Fund'', to be 
     administered by the Administrator.
       (2) Availability.--Amounts in the Fund shall be available 
     without fiscal year limitation or further appropriation by 
     Congress.
       (3) Authorization of appropriations.--There is authorized 
     to be appropriated to the Fund $20,000,000.
       (4) Rescission.--Effective on the day after the date on 
     which the term of all guarantees made under the pilot program 
     have ended, all amounts in the Fund are rescinded.
       (f) Termination.--The Administrator may not guarantee a 
     surety against loss under the pilot program on or after the 
     date that is 7 years after the date the date on which the 
     Administrator makes the first guarantee under the pilot 
     program.

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