[Congressional Record Volume 157, Number 41 (Thursday, March 17, 2011)]
[Senate]
[Pages S1843-S1845]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself, Ms. Landrieu, Mr. Brown of 
        Massachusetts, Mr. Merkley, and Mr. Enzi):
  S. 633. A bill to prevent fraud in small business contracting, and 
for other purposes; to the Committee on Small Business and 
Entrepreneurship.
  Ms. SNOWE. Mr. President, I rise today to introduce bipartisan 
legislation along with Senators Landrieu, Merkley, Brown of 
Massachusetts, and Enzi, titled the Small Business Contracting Fraud 
Prevention Act of 2011.
  In the past year, the Government Accountability Office, GAO, has 
identified vulnerabilities and abuses in virtually all of the SBA's 
contracting programs, including the 8(a) Business Development Program, 
the Historically Underutilized Business Zone, HUBZone, program, and the 
Service-Disabled Veteran-Owned small business, SDVOSB, program. Our 
legislation attempts to remedy the spate of illegitimate firms 
siphoning away contracts from the rightful businesses trying to compete 
within the SBA's contracting programs.
  As Ranking Member of the Senate Committee on Small Business and 
Entrepreneurship, I take very seriously our responsibility of vigorous 
oversight. That is why, last December, Senator Landrieu and I sent a 
letter to the SBA highlighting the recent press headlines and GAO 
reports of fraud and abuse that have plagued the Agency's contracting 
programs. That letter stated unequivocally that our Committee's first 
priority this Congress is ensuring that ALL of the SBA's contracting 
programs are running efficiently, effectively, and free of 
exploitation. Adopting this critical small business legislation is an 
effective first step at ensuring all small businesses are competing 
fairly and honestly within the Federal marketplace.
  As recently as Saturday March 12, the Washington Post, as part of an 
ongoing investigation, published an article titled, ``DC insiders can 
reap fortunes from federal programs for small businesses.'' This 
article states ``Government officials were not monitoring contracts for 
compliance with rules.'' The report exposes a glaring deficiency in 
contract oversight. Moreover, an SBA spokesperson is quoted as saying 
the SBA ``long ago transferred that authority to the Pentagon and other 
agencies.'' This hands-off attitude is unacceptable, and as I told the 
SBA Deputy Administrator at a recent Small Business Committee hearing, 
the ultimate authority for monitoring fraud lies with the SBA.
  This legislation contains recommendations both from the SBA Inspector 
General and the GAO for combating these reports of fraud and addresses 
vulnerabilities in the Service-Disabled Veteran-Owned small business 
program, the HUBZone program, and the 8(a) program. Additionally, the 
bill will work to change the culture at SBA to make the process of 
suspensions and debarments more transparent.
  In order to effectively execute the small business contracting 
programs, the SBA needs a comprehensive framework to provide effective 
certification, continued surveillance and monitoring, and robust 
enforcement throughout the SBA's contracting portfolio. This bill aims 
to increase criminal prosecutions as well as suspension and debarments 
for businesses found to have attained contracts through fraudulent 
means, and requires the SBA to submit a report to Congress annually 
detailing the specific data on all suspensions, debarments, and cases 
referred to the Department of Justice for criminal prosecutions.
  To that end, the SBIR bill we are now debating on the Senate floor, 
includes stringent oversight and fraud prevention measures, requiring 
Inspectors General of participating Federal agencies to establish fraud 
detection measures, coordinate fraud-related information sharing 
between agencies, and provide fraud prevention related education and 
training to agencies administering the programs, among other 
initiatives.
  As a senior member of the Senate Commerce Committee, I worked with 
the Chairman, Senator Rockefeller, in developing this language 
following a 2009 committee investigation and hearing on the subject of 
fraud in the SBIR program. My amendment goes even further and provides 
the SBA more stringent oversight capacity across all the SBA 
contracting programs. It is SBA's duty to utilize every fraud 
prevention measure at its disposal and this amendment puts the tools in 
place to punish the bad actors that have infiltrated the SBA 
contracting programs.
  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. 633

       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 ``Small Business Contracting 
     Fraud Prevention Act of 2011''.

     SEC. 2. DEFINITIONS.

       In this Act--
       (1) the term ``8(a) program'' means the program under 
     section 8(a) of the Small Business Act (15 U.S.C. 637(a));
       (2) the terms ``Administration'' and ``Administrator'' mean 
     the Small Business Administration and the Administrator 
     thereof, respectively;
       (3) the terms ``HUBZone'' and ``HUBZone small business 
     concern'' and ``HUBZone map'' have the meanings given those 
     terms in section 3(p) of the Small Business Act (15 U.S.C. 
     632(p)), as amended by this Act; and
       (4) the term ``recertification'' means a determination by 
     the Administrator that a business concern that was previously 
     determined to be a qualified HUBZone small business concern 
     is a qualified HUBZone small business concern under section 
     3(p)(5) of the Small Business Act (15 U.S.C. 632(p)(5)).

     SEC. 3. FRAUD DETERRENCE AT THE SMALL BUSINESS 
                   ADMINISTRATION.

       Section 16 of the Small Business Act (15 U.S.C. 645) is 
     amended--
       (1) in subsection (d)--
       (A) in paragraph (1)--
       (i) in the matter preceding subparagraph (A), by striking 
     ``Whoever'' and all that follows through ``oneself or 
     another'' and inserting the following: ``A person shall be 
     subject to the penalties and remedies described in paragraph 
     (2) if the person misrepresents the status of any concern or 
     person as a small business concern, a qualified HUBZone small 
     business concern, a small business concern owned and 
     controlled by socially and economically disadvantaged 
     individuals, a small business concern owned and controlled by 
     women, or a small business concern owned and controlled by 
     service-disabled veterans, in order to obtain for any 
     person'';
       (ii) by amending subparagraph (A) to read as follows:
       ``(A) prime contract, subcontract, grant, or cooperative 
     agreement to be awarded under subsection (a) or (m) of 
     section 8, or section 9, 15, 31, or 36;'';
       (iii) by striking subparagraph (B);
       (iv) by redesignating subparagraphs (C) and (D) as 
     subparagraphs (B) and (C), respectively; and
       (v) in subparagraph (C), as so redesignated, by striking 
     ``, shall be'' and all that follows and inserting a period;
       (B) in paragraph (2)--
       (i) by redesignating subparagraphs (C) and (D) as 
     subparagraphs (D) and (E), respectively; and
       (ii) by inserting after subparagraph (B) the following:
       ``(C) be subject to the civil remedies under subchapter III 
     of chapter 37 of title 31, United States Code (commonly known 
     as the `False Claims Act');''; and
       (C) by adding at the end the following:
       ``(3)(A) In the case of a violation of paragraph (1)(A), 
     (g), or (h), for purposes of a proceeding described in 
     subparagraph (A) or (C) of paragraph (2), the amount of the 
     loss to the Federal Government or the damages sustained by 
     the Federal Government, as applicable, shall be an amount 
     equal to the amount that the Federal Government paid to the 
     person that received a contract, grant, or cooperative 
     agreement described in paragraph (1)(A), (g), or (h), 
     respectively.
       ``(B) In the case of a violation of subparagraph (B) or (C) 
     of paragraph (1), for the purpose of a proceeding described 
     in subparagraph (A) or (C) of paragraph (2), the amount of 
     the loss to the Federal Government or the damages sustained 
     by the Federal Government, as applicable, shall be an amount 
     equal to the portion of any payment by the Federal Government 
     under a prime contract that was used for a subcontract 
     described in subparagraph (B) or (C) of paragraph (1), 
     respectively.
       ``(C) In a proceeding described in subparagraph (A) or (B), 
     no credit shall be applied against any loss or damages to the 
     Federal Government for the fair market value of the property 
     or services provided to the Federal Government.'';
       (2) by striking subsection (e) and inserting the following:
       ``(e) Any representation of the status of any concern or 
     person as a small business concern, a HUBZone small business 
     concern, a small business concern owned and controlled by 
     socially and economically disadvantaged individuals, a small 
     business concern owned and controlled by women, or a small 
     business concern owned and controlled by service-disabled 
     veterans, in order to obtain any prime contract, subcontract, 
     grant, or cooperative agreement described in subsection 
     (d)(1) shall be made in writing or

[[Page S1844]]

     through the Online Representations and Certifications 
     Application process required under section 4.1201 of the 
     Federal Acquisition Regulation, or any successor thereto.''; 
     and
       (3) by adding at the end the following:
       ``(g) A person shall be subject to the penalties and 
     remedies described in subsection (d)(2) if the person 
     misrepresents the status of any concern or person as a small 
     business concern, a qualified HUBZone small business concern, 
     a small business concern owned and controlled by socially and 
     economically disadvantaged individuals, a small business 
     concern owned and controlled by women, or a small business 
     concern owned and controlled by service-disabled veterans--
       ``(1) in order to allow any person to participate in any 
     program of the Administration; or
       ``(2) in relation to a protest of a contract award or 
     proposed contract award made under regulations issued by the 
     Administration.
       ``(h)(1) A person that submits a request for payment on a 
     contract or subcontract that is awarded under subsection (a) 
     or (m) of section 8, or section 9, 15, 31, or 36, shall be 
     deemed to have submitted a certification that the person 
     complied with regulations issued by the Administration 
     governing the percentage of work that the person is required 
     to perform on the contract or subcontract, unless the person 
     states, in writing, that the person did not comply with the 
     regulations.
       ``(2) A person shall be subject to the penalties and 
     remedies described in subsection (d)(2) if the person--
       ``(A) uses the services of a business other than the 
     business awarded the contract or subcontract to perform a 
     greater percentage of work under a contract than is permitted 
     by regulations issued by the Administration; or
       ``(B) willfully participates in a scheme to circumvent 
     regulations issued by the Administration governing the 
     percentage of work that a contractor is required to perform 
     on a contract.''.

     SEC. 4. VETERANS INTEGRITY IN CONTRACTING.

       (a) Definition.--Section 3(q)(1) of the Small Business Act 
     (15 U.S.C. 632(q)(1)) is amended by striking ``means a 
     veteran'' and all that follows and inserting the following: 
     ``means--
       ``(A) a veteran with a service-connected disability rated 
     by the Secretary of Veterans Affairs as zero percent or more 
     disabling; or
       ``(B) a former member of the Armed Forces who is retired, 
     separated, or placed on the temporary disability retired list 
     for physical disability under chapter 61 of title 10, United 
     States Code.''.
       (b) Veterans Contracting.--Section 4 of the Small Business 
     Act (15 U.S.C. 633) is amended by adding at the end the 
     following:
       ``(g) Veteran Status.--
       ``(1) In general.--A business concern seeking status as a 
     small business concern owned and controlled by service-
     disabled veterans shall--
       ``(A) submit an annual certification indicating that the 
     business concern is a small business concern owned and 
     controlled by service-disabled veterans by means of the 
     Online Representations and Certifications Application process 
     required under section 4.1201 of the Federal Acquisition 
     Regulation, or any successor thereto; and
       ``(B) register with--
       ``(i) the Central Contractor Registration database 
     maintained under subpart 4.11 of the Federal Acquisition 
     Regulation, or any successor thereto; and
       ``(ii) the VetBiz database of the Department of Veterans 
     Affairs, or any successor thereto.
       ``(2) Verification of status.--
       ``(A) Veterans affairs.--The Secretary of Veterans Affairs 
     shall determine whether a business concern registered with 
     the VetBiz database of the Department of Veterans Affairs, or 
     any successor thereto, as a small business concern owned and 
     controlled by veterans or a small business concern owned and 
     controlled by service-disabled veterans is owned and 
     controlled by a veteran or a service-disabled veteran, as the 
     case may be.
       ``(B) Federal agencies generally.--The head of each Federal 
     agency shall--
       ``(i) for a sole source contract awarded to a small 
     business concern owned and controlled by service-disabled 
     veterans or a contract awarded with competition restricted to 
     small business concerns owned and controlled by service-
     disabled veterans under section 36, determine whether a 
     business concern submitting a proposal for the contract is a 
     small business concern owned and controlled by service-
     disabled veterans; and
       ``(ii) use the VetBiz database of the Department of 
     Veterans Affairs, or any successor thereto, in determining 
     whether a business concern is a small business concern owned 
     and controlled by service-disabled veterans.
       ``(3) Debarment and suspension.--If the Administrator 
     determines that a business concern knowingly and willfully 
     misrepresented that the business concern is a small business 
     concern owned and controlled by service-disabled veterans, 
     the Administrator may debar or suspend the business concern 
     from contracting with the United States.''.
       (c) Integration of Databases.--Not later than 1 year after 
     the date of enactment of this Act, the Administrator for 
     Federal Procurement Policy and the Secretary of Veterans 
     Affairs shall ensure that data is shared on an ongoing basis 
     between the VetBiz database of the Department of Veterans 
     Affairs and the Central Contractor Registration database 
     maintained under subpart 4.11 of the Federal Acquisition 
     Regulation.

     SEC. 5. SECTION 8(A) PROGRAM IMPROVEMENTS.

       (a) Review of Effectiveness.--Section 8(a) of the Small 
     Business Act (15 U.S.C. 637(a)) is amended by adding at the 
     end the following:
       ``(22) Not later than 3 years after the date of enactment 
     of this paragraph, and every 3 years thereafter, the 
     Comptroller General of the United States shall--
       ``(A) 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
       ``(B) 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 subparagraph (A).''.
       (b) Other Improvements.--In order to improve the 8(a) 
     program, the Administrator shall--
       (1) not later than 90 days after the date of enactment of 
     this Act, begin to--
       (A) evaluate the feasibility of--
       (i) using additional third-party data sources;
       (ii) making unannounced visits of sites that are selected 
     randomly or using risk-based criteria;
       (iii) using fraud detection tools, including data-mining 
     techniques; and
       (iv) conducting financial and analytical training for the 
     business opportunity specialists of the Administration;
       (B) evaluate the feasibility and advisability of amending 
     regulations applicable the 8(a) program to require that 
     calculations of the adjusted net worth or total assets of an 
     individual include assets held by the spouse of the 
     individual; and
       (C) develop a more consistent enforcement strategy that 
     includes the suspension or debarment of contractors that 
     knowingly make misrepresentations in order to qualify for the 
     8(a) program; and
       (2) not later than 1 year after the date on which the 
     Comptroller General submits the report under section 
     8(a)(22)(B) of the Small Business Act, as added by subsection 
     (c), issue, in final form, proposed regulations of the 
     Administration that--
       (A) determine the economic disadvantage of a participant in 
     the 8(a) program based on the income and asset levels of the 
     participant at the time of application and annual 
     recertification for the 8(a) program; and
       (B) limit the ability of a small business concern to 
     participate in the 8(a) program if an immediate family member 
     of an owner of the small business concern is, or has been, a 
     participant in the 8(a) program, in the same industry.

     SEC. 6. HUBZONE IMPROVEMENTS.

       (a) Purpose.--The purpose of this section is to reform and 
     improve the HUBZone program of the Administration.
       (b) In General.--The Administrator shall--
       (1) ensure the HUBZone map is--
       (A) accurate and up-to-date; and
       (B) revised as new data is made available to maintain the 
     accuracy and currency of the HUBZone map;
       (2) implement policies for ensuring that only HUBZone small 
     business concerns determined to be qualified under section 
     3(p)(5) of the Small Business Act (15 U.S.C. 632(p)(5)) are 
     participating in the HUBZone program, including through the 
     appropriate use of technology to control costs and maximize, 
     among other benefits, uniformity, completeness, simplicity, 
     and efficiency;
       (3) 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 
     any application to be designated as a HUBZone small business 
     concern or for recertification for which the Administrator 
     has not made a determination as of the date that is 60 days 
     after the date on which the application was submitted or 
     initiated, which shall include a plan and timetable for 
     ensuring the timely processing of the applications; and
       (4) develop measures and implement plans to assess the 
     effectiveness of the HUBZone program that--
       (A) require the identification of a baseline point in time 
     to allow the assessment of economic development under the 
     HUBZone program, including creating additional jobs; and
       (B) take into account--
       (i) the economic characteristics of the HUBZone; and
       (ii) contracts being counted under multiple socioeconomic 
     subcategories.
       (c) Employment Percentage.--Section 3(p) of the Small 
     Business Act (15 U.S.C. 632(p)) is amended--
       (1) in paragraph (5), by adding at the end the following:
       ``(E) Employment percentage during interim period.--

[[Page S1845]]

       ``(i) Definition.--In this subparagraph, the term `interim 
     period' means the period beginning on the date on which the 
     Administrator determines that a HUBZone small business 
     concern is qualified under subparagraph (A) and ending on the 
     day before the date on which a contract under the HUBZone 
     program for which the HUBZone small business concern submits 
     a bid is awarded.
       ``(ii) Interim period.--During the interim period, the 
     Administrator may not determine that the HUBZone small 
     business is not qualified under subparagraph (A) based on a 
     failure to meet the applicable employment percentage under 
     subparagraph (A)(i)(I), unless the HUBZone small business 
     concern--

       ``(I) has not attempted to maintain the applicable 
     employment percentage under subparagraph (A)(i)(I); or
       ``(II) does not meet the applicable employment percentage--

       ``(aa) on the date on which the HUBZone small business 
     concern submits a bid for a contract under the HUBZone 
     program; or
       ``(bb) on the date on which the HUBZone small business 
     concern is awarded a contract under the HUBZone program.''; 
     and
       (2) by adding at the end the following:
       ``(8) Hubzone program.--The term `HUBZone program' means 
     the program established under section 31.
       ``(9) Hubzone map.--The term `HUBZone map' means the map 
     used by the Administration to identify HUBZones.''.
       (d) Redesignated Areas.--Section 3(p)(4)(C)(i) of the Small 
     Business Act (15 U.S.C. 632(p)(4)(C)(i)) is amended to read 
     as follows:
       ``(i) 3 years after the first date on which the 
     Administrator publishes a HUBZone map that is based on the 
     results from the 2010 decennial census; or''.

     SEC. 7. ANNUAL REPORT ON SUSPENSION, DEBARMENT, AND 
                   PROSECUTION.

       The Administrator shall submit an annual report to the 
     Committee on Small Business and Entrepreneurship of the 
     Senate and the Committee on Small Business of the House of 
     Representatives that contains--
       (1) the number of debarments from participation in programs 
     of the Administration issued by the Administrator during the 
     1-year period preceding the date of the report, including--
       (A) the number of debarments that were based on a 
     conviction; and
       (B) the number of debarments that were fact-based and did 
     not involve a conviction;
       (2) the number of suspensions from participation in 
     programs of the Administration issued by the Administrator 
     during the 1-year period preceding the date of the report, 
     including--
       (A) the number of suspensions issued that were based upon 
     indictments; and
       (B) the number of suspensions issued that were fact-based 
     and did not involve an indictment;
       (3) the number of suspension and debarments issued by the 
     Administrator during the 1-year period preceding the date of 
     the report that were based upon referrals from offices of the 
     Administration, other than the Office of Inspector General;
       (4) the number of suspension and debarments issued by the 
     Administrator during the 1-year period preceding the date of 
     the report based upon referrals from the Office of Inspector 
     General; and
       (5) the number of persons that the Administrator declined 
     to debar or suspend after a referral described in paragraph 
     (8), and the reason for each such decision.
                                 ______