[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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