[Senate Report 108-1]
[From the U.S. Government Publishing Office]



108th Congress 
 1st Session                     SENATE                          Report
                                                                  108-1
 ______________________________________________________________________

                         SUMMARY OF LEGISLATIVE
                        AND OVERSIGHT ACTIVITIES
                       DURING THE 107TH CONGRESS

                               __________

                              R E P O R T

                                 of the

                              COMMITTEE ON

                   SMALL BUSINESS & ENTREPRENEURSHIP

                          UNITED STATES SENATE

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                January 9, 2003.--Ordered to be printed








            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                      One Hundred Seventh Congress

                                 ------                                
                JOHN F. KERRY, Massachusetts, Chairman*
             CHRISTOPHER S. BOND, Missouri, Ranking Member*
CARL LEVIN, Michigan                 CONRAD BURNS, Montana
TOM HARKIN, Iowa                     ROBERT F. BENNETT, Utah
JOSEPH I. LIEBERMAN, Connecticut     OLYMPIA J. SNOWE, Maine
PAUL D. WELLSTONE, Minnesota**       MICHAEL ENZI, Wyoming
MAX CLELAND, Georgia                 PETER G. FITZGERALD, Illinois
MARY LANDRIEU, Louisiana             MIKE CRAPO, Idaho
JOHN EDWARDS, North Carolina         GEORGE ALLEN, Virginia
MARIA CANTWELL, Washington           JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri
    Patricia R. Forbes, Democratic Staff Director and Chief Counsel
               Emilia DiSanto, Republican Staff Director

----------
*As of June 6, 2001, Senator James Jeffords of Vermont moved from the 
Republican Party to become an Independent and caucus with the 
Democrats. With this change, the Democrats gained control of the Senate 
and Senator John F. Kerry became the Chairman of the Committee and 
Senator Christopher S. Bond became its Ranking Member.
**Senator Paul D. Wellstone was a member of the United States Senate 
from the State of Minnesota from January 3, 1991, through the date of 
his death on October 25, 2002. May he rest in peace.







                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. Overview.........................................................1
 II. Response to Terrorist Attacks of September 11, 2001..............2
          A. Assessment Meetings.................................     2
          B. Legislation.........................................     3
III. Homeland Security................................................4
          A. Monitoring Agencies for Use of Small Business in 
              Anti-Terrorism Technologies........................     4
          B. The Small Business Homeland Security Expo...........     4
          C. Small Business Procurement Protections in the 
              Department of Homeland Security....................     5
 IV. Oversight........................................................5
          A. Sale of Disaster Loans on the Secondary Market......     6
          B. Implementation of the New Markets Venture Capital 
              Program............................................     6
          C. Extending the New Markets Venture Capital 
              Fundraising Deadline for Applicants................     7
          D. The New Markets Venture Capital Tax Credit..........     7
          E. Compliance with Small Business Research & 
              Development Programs...............................     8
              1. Growing Gap Between Resources and 
                  Responsibilities in the SBA Office of 
                  Technology.....................................     8
              2. Publication and Finalization of the Policy 
                  Directives for the Small Business Innovation 
                  Research Program's Reauthorization of the 106th 
                  Congress.......................................     8
              3. The Department of Defense's Missile Defense 
                  Agency Compliance with the Small Business 
                  Innovation Research Program....................     9
          F. Implementation of Disaster Loans for 9/11 Small 
              Business Victims...................................     9
          G. Extending the Application Deadline for Economic 
              Injury Disaster Loans..............................     9
          H. Implementation of the National Veterans Business 
              Development Corporation............................    10
          I. General Accounting Office Study of the National 
              Veterans Business Development Corporation..........    10
          J. Merchant Banking Regulations and the Small Business 
              Investment Company Program.........................    10
          K. Contract Bundling by Defense Agencies...............    11
          L. Contract Reporting Requirements for the Department 
              of Energy..........................................    11
          M. Application and Certification Process for 8(a), 
              Historically Underutilized Business Zone and Small 
              and Disadvantaged Business Programs................    12
          N. Presidential Nominations............................    12
              1. Hector V. Barreto, Jr...........................    12
              2. Thomas M. Sullivan..............................    12
              3. Melanie R. Sabelhaus............................    13
              4. Harold Damelin..................................    13
  V. Energy and the Environment......................................13
          A. Hearing: ``The Business of Environmental 
              Technology''.......................................    13
          B. Field Hearing: ``Energy Crisis: Taking the Power Out 
              of Small Business''................................    14
          C. Amendment No. 3099 to the Energy Policy Act of 2002.    15
          D. Amendment No. 3152 to the Energy Policy Act of 2002.    15
 VI. Procurement.....................................................15
          A. The Office of Small and Disadvantaged Business 
              Utilization........................................    16
          B. The Office of Small and Disadvantaged Business 
              Utilization and the Government Prime Contracting 
              Goal...............................................    16
          C. Priority Preference and Parity for the 8(a) and 
              Historically Underutilized Business Zone Programs..    17
          D. Contract Bundling...................................    19
          E. Small Business Team Arrangements....................    19
          F. Improving Contract Bundling Reporting Requirements 
              and Expanding Participation in the Historically 
              Underutilized Business Zone Program................    20
VII. Technology, Research, & Development.............................20
          A. Reauthorization of the Small Business Technology 
              Transfer Program...................................    21
          B. Small Business Innovation Research Program and Small 
              Business Technology Transfer Program Foreign Patent 
              Protection.........................................    21
VIII.Education & Development.........................................22

          A. Vocational and Technical Entrepreneurship Training..    22
          B. Native American Small Business Development..........    23
          C. Funding the Tribal Business Information Center 
              Program............................................    23
 IX. Disaster Loan Program...........................................24
          A. Energy Disaster Assistance..........................    24
          B. Drought Disaster Assistance.........................    25
  X. Regulatory Assistance...........................................27
          A. Regulatory Compliance Assistance....................    27
          B. Regulatory Impacts on Small Businesses..............    28
 XI. Tax Issues......................................................28
          A. Joint House-Senate Small Business Committee 
              Roundtable on Tax Agenda for Small Business........    28
          B. The Affordable Small Business Stimulus Act of 2001..    29
          C. The Single Point Filing Act.........................    30
          D. The Business Retained Income During Growth Expansion 
              Act of 2002........................................    30
          E. The Worker Investment and Retirement Education Act 
              of 2002............................................    31
XII. Trade Issues....................................................31
          A. Seeking an Enhanced Role for Small Businesses at the 
              World Trade Organization...........................    31
XIII.Other Committee Initiatives.....................................32

          A. Honoring Milton Stewart.............................    32
          B. Slotting Allowances.................................    32
          C. The Office of Advocacy..............................    33
          D. The White House Quadrennial Small Business Summit...    33
XIV. The SBA Budget and Appropriations...............................34
          A. Hearing: ``SBA's Funding Priorities for FY 2002''...    35
          B. Letters Sent to Government Officials................    36
          C. Hearing: ``The SBA Fiscal Year 2003 Budget and Other 
              Matters''..........................................    36
 XV. Federal Loan Programs and Access to Capital.....................37
          A. The Microloan Program...............................    37
          B. The Small Business Investment Company Program.......    38
          C. Letters Regarding the 7(a) Loan Program's Subsidy 
              Rate Model.........................................    38
          D. Roundtable: ``The 7(a) Loan Guaranty Program: A Look 
              at SBA's Flagship Program's Fees and Subsidy Rate''    39
XVI. Appendixes......................................................40
          A. Hearings of the 107th Congress......................    40
              1. First Session...................................    40
              2. Second Session..................................    41
          B. Bills Referred to the Committee.....................    41
              1. First Session...................................    41
              2. Second Session..................................    43
          C. Public Laws.........................................    43
              1. PL 107-50: the ``Small Business Technology 
                  Transfer Reauthorization Act of 2001''.........    43
              2. PL 107-100: the ``Small Business Investment 
                  Company Amendments Act of 2001''...............    46







108th Congress                                                   Report
                                 SENATE
 1st Session                                                      108-1

======================================================================
 
   SUMMARY OF LEGISLATIVE AND OVERSIGHT ACTIVITIES DURING THE 107TH 
                                CONGRESS

                                _______
                                

                January 9, 2003.--Ordered to be printed

                                _______
                                

 Mr. Kerry, from the Committee on Small Business and Entrepreneurship, 
                        submitted the following

                              R E P O R T

                                Overview

    The 107th Congress was one of great changes, both in 
Congress and for the Nation. One major change in the Senate 
during the 107th Congress occurred when Senator Jim Jeffords of 
Vermont switched his party affiliation on June 5, 2001, from 
Republican to Independent and caucused with the Democrats. This 
changed the shared majority in the Senate to Democratic control 
and on June 29, 2001, Democrats took control of committees. 
With that change, Senator John F. Kerry, Ranking Member of the 
Committee on Small Business, became Chairman. One of Chairman 
Kerry's first acts as Chairman was to change the name of the 
Committee to the Committee on Small Business and 
Entrepreneurship, a title that more fully represents the 
spectrum of small businesses and allows the Committee to focus 
some of its efforts on the entrepreneurial spirit that fuels 
the start up of fast-growing small businesses.
    A great change for small businesses came with the 
challenges they faced in the uncertain economy. After years of 
economic increase, the robust economy was beginning to slow 
down. After eight years of steady unemployment declines, rates 
were beginning to increase. Economists expected the gross 
domestic product, which had also been on the rise, to be 
lackluster in the coming years. For the first time since 
November of 1998, the Federal Reserve Board cut interest rates 
in an attempt to soften the predicted economic slump. The Fed 
would go on to cut rates to 1.25 percent, a 40-year low. And 
while consumer confidence remained high and inflation low, 
bankruptcies rose 12.8 percent in 2001 and the markets 
weakened. The NASDAQ fell 21 percent in 2001, and 32 percent in 
2002. To help small businesses, the Committee worked to bolster 
Federal small business contracting, to strengthen SBA loan 
programs, to increase and improve educational and development 
resources, to ease regulatory burdens and to promote 
responsible tax initiatives.
    The events of September 11, 2001, marked a much greater 
change for our Nation, a tragedy that affected all Americans 
both personally and economically. In the months following the 
attacks, unemployment rose further, economic growth continued 
to decline, and many banks tightened their lending to small 
business. These changes affected millions of small businesses, 
causing many to go out of business and many more to experience 
severe financial hardship. The Senate Committee on Small 
Business and Entrepreneurship responded quickly to help these 
small businesses, and the Congress enacted legislation geared 
toward assisting small businesses affected by the terrorist 
attacks. This difficult economic situation for small businesses 
was exacerbated by Bush Administration attempts to impose 
severe cuts in funding for important SBA loan programs, which 
the Committee fought.
    Another way our nation changed as a result of the events of 
September 11, 2001, was to direct more of its focus and 
resources to homeland security and the fight against terrorism. 
Small businesses contribute greatly to homeland security 
efforts, and during the 107th Congress the Committee helped 
those businesses by promoting procurement among Federal 
agencies, as well as ensuring that Federal agencies were 
complying with procurement directives. The Committee held the 
Small Business Homeland Security Expo to spotlight some of 
those businesses whose purpose is to protect our nation. The 
Committee also worked to stop contract bundling among Federal 
agencies to ensure that more small businesses would have access 
to these contracts, many of which are crucial to homeland 
security.
    In the 1990s, the number of small businesses involved with 
technology increased dramatically. During the 107th Congress, 
the Committee focused on a number of technology issues 
including reauthorizing and implementing the Small Business 
Innovation Research (SBIR) program and the Small Business 
Technology Transfer (STTR) program in which small businesses 
are involved with research and development for Federal 
agencies.
    The Committee also directed its attention to energy and 
environmental issues that affect small businesses every day. In 
the beginning of the 107th Congress these problems were 
highlighted because the cost of energy and fuel increased 
dramatically, causing small businesses' costs to increase as 
well as their access to energy to diminish. Toward the end of 
the Congress, many small businesses were experiencing 
difficulty due to severe drought in their areas. The Committee 
examined these problems, held hearings and Roundtables on the 
issues, and proposed legislation to help small businesses 
through these difficult times.

          Response to Terrorist Attacks of September 11, 2001


Assessment Meetings

    Shortly after the terrorist attacks of 9/11, Chairman Kerry 
reached out to a wide array of small business trade 
associations, the SBA's lending and counseling partners, and 
many small businesses to assess the magnitude and scope of 
their injuries. The meetings helped the Committee to identify 
the needs of small businesses and what Congress could do to 
mitigate losses, closures, bankruptcies and layoffs.
    Among those most severely affected were the owners of small 
businesses located in airports and those associated with the 
tourism and hospitality industry. Those sectors were hit 
especially hard because of the closure of the airports, the 
drop in airline passengers, and the public's general reluctance 
to travel post 9/11.
    The Committee also met with Federal government officials 
charged with assisting small businesses or doing business with 
them through Federal procurement. In addition, the Committee 
sought the views of government contractors and subcontractors 
about future Federal procurement opportunities and their views 
regarding the upcoming increase in Federal spending, especially 
on defense. These meetings and communications resulted in 
several bills, including S. 1499, the American Small Business 
Emergency Relief and Recovery Act.

Legislation

    The main piece of small business legislation developed in 
response to the terrorist attacks was S. 1499, the American 
Small Business Emergency Relief and Recovery Act of 2001. 
Chairman Kerry introduced this bill on October 4, 2001, with 
Ranking Member Bond. The bill, with 62 cosponsors, had broad 
bi-partisan support.
    The purpose of the small business legislation, S. 1499, was 
to strengthen and expand access to the Small Business 
Administration's loans and management counseling in order to 
help small businesses meet their payments on existing debts, 
finance their businesses, maintain and create jobs, and thereby 
provide some stability for the economy. In addition, the bill 
addressed the shrinking availability of credit and venture 
capital to small businesses through traditional lenders and 
investors that started before 9/11 but was exacerbated by the 
attacks. Finally, this bill included provisions to aid Federal 
contractors facing increased costs when trying to access 
Federal facilities to work on existing contracts. In spite of 
the strong bi-partisan support for the comprehensive relief 
legislation, politics obstructed passage of this bill in a 
timely and meaningful way.
    Ultimately, Chairman Kerry, working with Senators Byrd and 
Hollings, was successful in enacting and funding key provisions 
of the bill as part of emergency spending and defense 
legislation, H.R. 3338, the Department of Defense 
Appropriations Act of 2002 and the Emergency Supplemental Act 
of 2002, which became PL 107-177. Those key provisions (1) 
authorized the SBA to make 7(a) emergency loans for small 
business victims of 9/11th, (2)deferred payments of principle 
and interest, with no accrual, on disaster loans for two years from the 
date of issuance for small businesses located in the officially 
declared disaster areas in and surrounding New York, Virginia and 
Pennsylvania, (3) reduced for one year 7(a) lending guarantee fees from 
.5 to .25 percent to reduce the cost of making the loans and to provide 
an incentive for lenders to make loans to effected small businesses, 
and (4) appropriated $75 million in funding to pay for the cost of 
guaranteeing about $4.5 billion in 7(a) STAR Loans through the economic 
injury disaster loans and 7(a) supplemental disaster loans, known as 
STAR Loans. Almost 17,000 small businesses secured low-cost working 
capital loans, pumping $3.95 billion into the economy.

                           Homeland Security

    The roles of small business and the Small Business 
Administration are as important to homeland security and 
national defense today as they were 50 years ago when the 
Agency was created. Small businesses were critical to winning 
World War II, helping the U.S. quickly build up mass production 
and diversify the number and location of manufacturers so that 
our country's soldiers, and those of our allies, were well 
supplied and not dependent on the fate of one plant. In 
addition to the continuing need for the SBA to foster the 
startup and growth of small businesses so that the United 
States has diverse industries to fight the war on terror, small 
businesses are critical to researching and developing cutting-
edge technologies for our homeland security. We need 
technologies that enable us to identify and catch terrorists 
before they board a flight, protect civilians from anthrax or 
small pox, and provide our military with the best equipment 
possible.
    The country has two main Federal small business technology 
programs, the Small Business Innovation Research (SBIR) and 
Small Business Technology Transfer (STTR) program, through 
which the government can easily identify small businesses for 
these purposes. The Committee has been active in fostering 
these programs, facilitating the collaborations they promote 
and raising general public awareness of the contributions and 
capabilities SBIR and STTR companies make.

Monitoring Agencies for Use of Small Business in Anti-Terrorism 
        Technologies

    On November 9, 2001, Chairman Kerry, joined by Ranking 
Member Bond, sent a letter to SBA Administrator Hector Barreto 
regarding the SBIR and STTR programs. They requested a survey 
of the participating SBIR and STTR agencies in order to assess 
the role of small businesses in meeting the anti-terrorism 
mission through these innovation-driven programs.
    The purpose was to (1) find out which agencies were already 
using the programs as a resource, (2) identify the most 
significant projects, and (3) have the SBA actively encourage 
participating agencies to solicit topics through the SBIR and 
STTR programs for Federal anti-terrorism projects. The 
Committee found that the SBIR and STTR program managers had 
long been tapping into the small businesses to meet agency 
missions and recognized their value, but among higher-level 
officials at the agencies, including at the SBA, there was very 
little focus on using this valuable resource.

The Small Business Homeland Security Expo

    Reinforcing the findings from the above-mentioned survey, 
small businesses and small business trade associations 
contacted the Committee complaining that the Federal government 
was investing billions in homeland security but contracts were 
not being awarded to small businesses.
    To help address this issue, Chairman Kerry and Ranking 
Member Bond co-hosted the Small Business Homeland Security Expo 
on July 10, 2002. The event was an exposition for small 
businesses to educate members of Congress about their products 
to help fight and win the war against terrorism. The Expo had 
nearly 50 small businesses participating, with hundreds more 
appearing in a procurement booklet containing all of the small 
businesses nominated by each member of Congress. The booklet is 
a resource for procurement officers in government and the 
private sector to identify small business in the homeland 
security field. White House Homeland Security Advisor Tom 
Ridge, SBA Administrator Hector Barreto and numerous Federal 
procurement personnel attended the event. Total attendance was 
estimated at more than 1,000 people.
    In the wake of 9/11 and the ramping up of the nation's 
homeland security, procurement opportunities in the Federal 
government and in the private sector were increasing quickly. 
The event highlighted the significant role small businesses can 
play in supporting the country's war on terror.
    On the eve of the Expo, the Senate passed S.Res.264 
expressing the sense of the Senate that small business 
participation is vital to the defense of our nation, and that 
Federal, State, and local governments should aggressively seek 
out and purchase innovative technologies and services from 
American small businesses to help in homeland defense and the 
fight against terrorism.

Small Business Procurement Protections in the Department of Homeland 
        Security

    On July 18, 2002, Chairman Kerry sent a letter, co-signed 
by Ranking Member Bond, to Senator Lieberman, Chairman of the 
Senate Committee on Governmental Affairs. The letter was a 
response to Senator Lieberman's request for feedback from 
Senate committee chairmen on the Bush Administration's proposal 
to create a Department of Homeland Security. Chairman Kerry's 
letter raised serious concerns with the procurement provisions 
of the proposal, questioning why the proposed Department needed 
a blanket waiver from all procurement regulations, including 
those intended to strengthen the small business supply base.
    In the letter, Chairman Kerry argued that such a waiver was 
unprecedented and would harm small-business participation in 
Federal procurement opportunities, and by extension, the fight 
against terrorism, as small-business participation is essential 
in this battle. Finally, the letter stressed that the Bush 
proposal would likely have the opposite effect as intended and 
result in delays in acquisitions and increase the potential for 
fraud.
    Chairman Kerry was able to include language in the Homeland 
Security Department bill that eliminated the blanket waiver and 
substituted a one-year procurement waiver.

                               Oversight

    Small business is the engine of economic growth in our 
Nation. However, many small businesses need assistance to gain 
fair treatment by Federal government agencies, access to 
capital, and better access to government contracts. Under the 
rules of the United States Senate, the Senate Small Business 
and Entrepreneurship Committee has jurisdiction over matters 
related to the Small Business Administration (SBA). In order to 
carry out these responsibilities, the Committee must 
investigate all problems related to small business enterprises 
and their dealings with the Federal Government.

Sale of Disaster Loans on the Secondary Market

    On December 19, 2001, Chairman Kerry joined with Senators 
Dorgan, Conrad, Wellstone, Congressman Pomeroy, and Delegate 
Donna Christensen in sending a letter to SBA Administrator 
Hector Barreto requesting that he make changes to the SBA's 
Asset Sales Program with respect to disaster victims. This 
became necessary because of complaints from borrowers about the 
inflexibility and sometimes ruthlessness of loan collection 
companies that had purchased their loans from the SBA, such as 
when borrowers requested a substitute or release of collateral 
or subordination of a lien position. There were attempts 
throughout the Congress--in the Senate and the House of 
Representatives--to enact legislation to eliminate or put a 
moratorium on the sale of disaster loans in the SBA's asset 
sale program, but they were routinely blocked. As an 
alternative, the letter urged the SBA to buy back problematic 
loans and to substitute these loans with other SBA loans. In 
the response of January 29, 2002, the SBA said it was not a 
feasible option to buy back problematic loans and the Agency 
offered no alternative.

Implementation of the New Markets Venture Capital Program

    On March 9, 2001, Senator Kerry sent a letter to Acting SBA 
Administrator John Whitmore requesting a detailed schedule of 
how the Agency planned to implement the New Markets Venture 
Capital (MNVC) program before the funding expired on September 
30th, 2001. While the SBA efficiently developed regulations 
under the Clinton Administration, their effective date, along 
with that of many other published regulations, was postponed 
for 60 days by direction of the White House on January 20, 
2001.
    The firms and organizations specializing in community 
development venture capital were very concerned about the 
Administration's series of delays in implementing this program, 
particularly since the funding was scheduled to lapse in 
September, 2001, and the Administration had eliminated all 
funding for the program in FY 2002, demonstrating a lack of 
support for the program. The delays left applicants an 
unreasonably short time frame of two months, instead of the 
maximum two years allowed by statute, to raise the required 
$6.5 million in matching funds to qualify. Ultimately, the 
delays did have an adverse impact on the approval of applicants 
and their ability to raise capital, which was a deterrent for 
attracting an adequate number of applicants, triggering the 
need for Congress to intervene through legislation, letters, 
and meetings. On June 6, 2001, Chairman Kerry, Senator Snowe, 
and 14 other senators sent a letter to Chairman Hollings and 
Ranking Member Gregg of the Appropriations Subcommittee on 
Commerce, Justice and State requesting a technical change to 
the FY 2001 appropriations for the New Markets Venture Capital 
(NMVC) program.
    In order to allow the SBA to implement the program 
according to Congressional intent, thereby giving applicants a 
more reasonable amount of time to raise the matching funds, the 
Senators requested that the FY 2001 appropriations for the 
grant and debenture funds be changed to conform with the 
authorizing statute, PL 106-554, allowing the funds to remain 
available for obligation through 2006. The technical change was 
budget neutral and the Senators' request was successfully 
enacted as part of the 2001 Supplemental Appropriations Act.

Extending the New Markets Venture Capital Fundraising Deadline for 
        Applicants

    On July 27, 2001, Chairman Kerry and Congressman Don 
Manzullo, Chairman of the House Committee on Small Business, 
sent a letter to Administrator Hector V. Barreto requesting 
prompt implementation of the technical change enacted as part 
of the 2001 above-mentioned Supplemental Appropriations Act. 
This was necessary because, despite the enactment of the 
appropriations change, the SBA had not given NMVC applicants 
more time to raise the matching funds and would not offer a 
second round of funding until the first round of applicants met 
their fundraising deadlines. On August 1, 2001, the SBA 
extended the time NMVCs had to raise matching funds until 
January 9, 2002, giving NMVCs as much as six months.
    Although the deadline for NMVC applicants to raise matching 
capital was extended, the aggregate six months provided was 
inadequate and not close to the maximum two years allowed by 
statute and intended by Congress. The fundraising difficulties 
were compounded by the economic downturn of the 9/11 terrorist 
attacks, and complications with the implementation of the 
complementary New Markets Venture Capital Tax credit, an 
incentive for investors.
    Once again, Chairman Kerry requested through meetings with 
the SBA that it use its statutory authority to revise the 
deadline so that NMVC applicants had up to the statutory two 
years to raise the money, but the Agency refused. Chairman 
Kerry then proposed an amendment to S. 1196, the Small Business 
Investment Company Amendments Act of 2001, to give NMVC 
companies the full two years and offer a second round of 
funding in the Spring of 2002. In the end, the Committee 
compromised with the Agency by agreeing to take the provisions 
out of the legislation in exchange for an announcement from the 
Administration to extend the deadline to December 31, 2002, and 
offer a second round in the fall of 2002. As of early January 
2003, the Committee was still waiting for the Administration to 
offer the second round of NMVC funding.

The New Markets Venture Capital Tax Credit

    On May 23, 2002, Chairman Kerry and Senator Snowe sent a 
letter to Finance Committee Chairman Max Baucus and Ranking 
Minority Member Charles Grassley asking for their support in 
amending the New Markets Tax Credit (IRC 45D) so that New 
Markets Venture Capital companies receive the same favorable 
tax treatment as certified Community Development Financial 
Institutions (CDFIs) and Specialized Small Business Investment 
Companies (SSBICs). Currently the New Markets Venture Capital 
programs do not work as effectively as they were intended to, 
partly because the tax credit program does not expressly apply 
to the New Markets venture capital companies. In order to be 
eligible to apply for a tax credit allocation, the applicant 
must first be certified as a Community Development Entity 
(CDE). CDFIs and SSBICs are automatically certified, but NMVC 
companies are not and must go through a lengthy application 
process for certification, virtually duplicating a rigorous 
review by the SBA. Excluding NMVC companies have created an 
uneven playing field that makes it harder for them to attract 
investors, makes the process more bureaucratic, and goes 
against the intentions of Congress. To rectify this, the 
Senators recommended that the statute be changed to 
automatically certify NMVC companies as community development 
entities. The Finance Committee agreed to include the change as 
part of a comprehensive small business tax package when it acts 
on one. The Committee on Joint Tax estimated that there would 
be no reverse effect.

Compliance with Small Business Research & Development Programs

    In the 107th Congress, the Committee on Small Business and 
Entrepreneurship worked to preserve and increase the role of 
small businesses in Federal research and development, mainly 
through the Small Business Innovation Research (SBIR) program 
and the Small Business Technology Transfer (STTR) program. 
Under the Small Business Act (15 U.S.C. 638(f)(1)(C)), all 
Federal agencies with extramural research and development (R&D) 
budgets of $100 million or more must participate in the program 
and therefore reserve at least 2.5 percent of their extramural 
R&D annual budget for projects with small businesses. For 
agencies with extramural research and development budgets of $1 
billion or more, they must participate in the Small Business 
Innovation Research program and therefore reserve at least 
reserve at least .15 percent of their extramural R&D annual 
budget for projects with small businesses. The Committee was 
successful in 2001 and 2002 in (1) keeping all agencies 
participating and in (2) keeping the programs operating under 
continuing resolutions.
            Growing Gap Between Resources and Responsibilities
    On June 11, 2001, Chairman Kerry, with Ranking Member Bond, 
sent a letter to SBA's Acting Administrator John Whitmore 
regarding the Agency's Office of Technology, which administers 
the STTR and SBIR programs. The purpose of the letter was to 
get historical information to document the dwindling resources 
in funds and staffing in the department that runs the SBIR and 
STTR programs. The results showed that from fiscal years 1983-
2000, the number of awards had more than doubled from $502 
million to $1.2 billion, the budget had been cut just about in 
half--from $907,000 to $530,000--and the staff has been reduced 
from ten to six. That number has since dropped to five, even 
though the research is needed more than ever for our national 
defense and homeland security.
            Publication and Finalization of the Policy Directives for 
                    the Small Business Innovation Research Program's 
                    Reauthorization of the 106th Congress
    The Committee monitored the development of these 
regulations and their publication. In spite of great delays 
from participating SBIR agencies and the Office of Management 
and Budget in drafting the directives, Incoming Chairman Kerry 
and Ranking Member Bond sent a letter to SBA's acting 
Administrator John Whitmore on June 15, 2001, requesting an 
extension of the comment period for at least 30 days on policy 
directives for the SBIR program because the small business 
community did not feel it had adequate time to respond and that 
the issues, such as intellectual/data rights, were so important 
more input was imperative. The Agency agreed and extended the 
comment period from June 18, 2001, to July 23, 2001.
            The Department of Defense's Missile Defense Agency 
                    Compliance with the Small Business Innovation 
                    Research Program
    On January 29, 2002, Chairman Kerry and Ranking Member Bond 
sent a letter to Secretary of Defense Donald Rumsfeld regarding 
an amendment stealthfully included in the FY 2002 Department of 
Defense Appropriations Act which attempted to exempt one of the 
DoD's agencies, the Missile Defense Agency (formerly the 
Ballistic Missile Defense Organization), from setting aside 2.5 
percent of its extramural R&D funds for contracts with small 
business concerns through the SBIR program. Instead the change 
required MDA to set aside only a minimum of $75 million, which 
amounted to an estimated $74 million less for small business 
R&D firms through the SBIR program. The Committee wrote to 
inform DoD that it was still legally required to reserve 2.5 
percent of its entire extramural R&D budget for small business 
concerns. If it reduced MDA's reserve below the 2.5 percent, it 
would therefore have to explain from which other agencies 
within the Department it would make up the difference. Though 
the response was extremely late, the Committee was pleased that 
the DoD agreed to comply with the overall percentage and apply 
it to each of its agencies.

Implementation of Disaster Loans for 9/11 Small Business Victims

    On January 16, 2002, Chairman Kerry and Ranking Member Bond 
sent a letter to SBA Administrator Hector Barreto regarding 
7(a) Disaster Loans. The Senators requested a detailed 
description of how and when the Agency would implement the 
funding and authority for 7(a) 9/11 disaster loans, also known 
as STAR Loans, by January 22, 2002. Prompt implementation was 
critical because these loans could be delivered through the 
SBA's 5,000 private-sector 7(a) lending partners, which were 
located throughout every state and would cost five times less 
than economic injury disaster loans proposed by the 
Administration. Originally this provision was introduced as 
part of S. 1499, the Small Business Relief and Recovery Act of 
2001, but the Administration opposed the loans and blocked the 
legislation from passing the Senate for five months. 
Ultimately, the Committee succeeded in getting the provision 
authorized and funded as part of H.R. 3338/PL 107-117, the FY 
2002 Department of Defense Appropriations Act. The rest of S. 
1499, with changes agreed upon with the Administration, passed 
the full Senate by unanimous consent on March 22, 2002.

Extending the Application Deadline for Economic Injury Disaster Loans

    On May 24, 2002, Chairman Kerry sent a letter to SBA 
Administrator Hector Barreto regarding the application deadline 
for economic injury disaster loans related to 9/11 victims 
outside of New York, Virginia, and Pennsylvania. On May 22nd, 
the deadline had expired, limiting to six months the 
application period despite the Administration's general 
practice of allowing small business disaster victims nine 
months to apply. The letter urged Administrator Barreto to 
extend the filing deadline until September 30th, giving 9/11 
small business victims across the country the same amount of 
time to apply as disaster victims in New York, Virginia, and 
Pennsylvania and the surrounding counties. Administrator 
Barreto replied on May 31, 2002 that the Administration would 
not extend the deadline because, among other reasons, there was 
no demand for such loans. The SBA's own weekly reports 
contradicted that conclusion and showed that applications were 
being submitted from small businesses in all but five states. 
Chairman Kerry continued to push for an extension through 
discussions and meetings with the SBA and the OMB. Finally, the 
SBA agreed on June 17 to extend the application period for 9/11 
victims throughout the nation until September 30, 2002. Because 
of the extension, about 1,600 more small businesses were able 
to borrow $217 million to get their businesses operating again.

Implementation of the National Veterans Business Development 
        Corporation

    The National Veterans Business Development Corporation was 
authorized on August 17, 1999, as part of PL 106-50, and is 
considered by veterans service organizations key to helping 
veterans, particularly service-disabled veterans, start their 
own businesses, run them more successfully, and compete for 
Federal contracts. This translates into greater opportunities 
for financial security and self-sufficiency. Senator Kerry 
worked hard to pass PL 106-50 in the Senate, which included his 
bill to provide disaster loans to reservists who own small 
businesses and are called to active duty. Both he and Ranking 
Member Bond consider implementation of the Corporation very 
important and have played a continual role in oversight of its 
development. In this Congress, Chairman Kerry and Senator 
Cleland put forth an amendment, No. 3669, to H.R. 4775, the 
Post 9/11 Supplemental Appropriations bill, to permit the 
Corporation to retain its FY 2002 appropriation of $4 million 
until expended. This amendment is critical to the success of 
the Corporation as it works toward self-funding. The amendment 
was maintained in conference and enacted.

General Accounting Office Study of the National Veterans Business 
        Development Corporation

    As part of PL 106-50, the Corporation's authorizing 
legislation, GAO is to conduct a study. Chairman Kerry and 
House Small Business Committee Chairman Don Manzullo of 
Illinois have been working with the GAO through periodic 
meetings to shape the study and monitor the Corporation's 
progress.

Merchant Banking Regulations and the Small Business Investment Company 
        Program

    Chairman Kerry successfully led congressional efforts to 
stop the enactment of the Federal Reserve's proposed rule 
governing capital treatment for merchant banking activities 
that would have negatively affected the SBA's venture capital 
program, the Small Business Investment Company Program (SBIC). 
The proposed Federal Reserve rule would have forced financial 
institutions that either own or invest in an SBIC to deduct 50 
percent of the total value of their investment from their 
regulatory capital. The increased deductions were likely to 
adversely impact the success of the SBIC program by 
discouraging financial institutions from investing in SBICs. 
This in turn would have decreased the availability of equity 
capital for small business. During the 106th Congress, Senator 
Kerry wrote a letter to Federal Reserve Chairman Greenspan that 
was also signed by Senate Small Business Committee Chairman 
Bond, House Small Business Committee Chairman Talent, and 
Ranking Member Velazquez, asking that the provision that 
affects SBICs be dropped. In January 2001, their efforts proved 
unsuccessful when the Federal Reserve proposed new rules 
governing regulatory capital treatment for equity investments 
that exempted SBICs from any new capital deduction 
requirements.

Contract Bundling by Defense Agencies

    On March 5, 2001, Ranking Member Kerry and Chairman Bond 
sent a letter to Acting Secretary of the Air Force Lawrence 
Delany inquiring about the Air Force's Flexible Acquisition and 
Sustainment Tool (FAST), which is a $7.4 billion bundled 
contract. The letter requested detailed information about the 
manner in which the Air Force intended to monitor and enforce 
compliance with subcontracting plans and with the award of task 
orders to small business prime contractors under FAST.
    On June 26, 2002--upon learning that the Department of the 
Army was establishing the Army Contracting Agency, and having 
concerns that the Agency could unnecessarily bundle contracts, 
eliminating the ability of small businesses to compete for such 
procurement awards--Chairman Kerry offered S. Amdt. 4106 to the 
National Defense Authorization Act, S. 2514. The amendment 
required the Secretary of the Army to submit, during its first 
year of operation, a detailed report on the effects of the Army 
Contracting Agency on small business. The Amendment was 
retained in the enacted version of the bill, which became PL 
107-314.

Contract Reporting Requirements for the Department of Energy

    In 1999, Senator Kerry and Senator Bond were successful in 
compelling the Department of Energy to accurately report its 
small-business prime contracting awards. Previously, the 
Department of Energy incorrectly reported subcontracting awards 
as prime contracting awards. In May of 2002, the Department of 
Energy indicated that it would revert back to its previous, 
inaccurate reporting method. On May 22, 2002, Chairman Kerry 
and Ranking Member Bond sent a letter to the Energy Secretary 
Abraham congratulating the Department on the recent progress it 
had made in reaching out to small business, but also informing 
the Secretary that a return to previous practices would be a 
step backward and unacceptable. Secretary Abraham responded on 
July 15, 2002 to the senators, stating that the Department 
would continue to comply with the Office of Federal Procurement 
Policy'ssubcontract reporting directive and that it was working 
with the SBA on such matters. It also committed to increasing small 
business's share of the Department's prime contract awards.

Application and Certification Process for 8(a), Historically 
        Underutilized Business Zone and Small and Disadvantaged 
        Business Programs

    On February 14, 2002, after a series of communications with 
small-business owners and representative organizations and 
groups, Chairman Kerry wrote to SBA Administrator Hector 
Barreto concerning the outdated application and certification 
processes for the 8(a) and Small Disadvantaged Business (SDB) 
programs at the SBA. In the letter, Chairman Kerry urged the 
Administrator to use the HUBZone program's application and 
certification process as a model for improving the 8(a) and SDB 
application and certification processes. The Chairman was 
concerned that the 8(a) and SDB programs were not being treated 
equally with regard to the online application and certification 
process. Kerry wrote that true equality for the programs 
requires equal treatment on all levels. To better understand 
the problems expressed by small businesses regarding 
application and certification process for each program, 
Chairman Kerry posed in the letter a series of questions to the 
Administrator regarding the processes. Administrator Barreto 
responded on March 14, 2002, noting that the SBA was examining 
the problems with the process. The Agency also has a task force 
working on streamlining the electronic version of the 
application, and expects the project to be complete in the 
summer of 2003.

Presidential Nominations

    During the 107th Congress, the Committee on Small Business 
and Entrepreneurship received four executive nominations from 
the President.
            Hector V. Barreto, Jr.
    On July 19, 2001 the Committee held a hearing to consider 
the nomination of small business owner Hector V. Barreto, Jr. 
to be the Administrator of the Small Business Administration. 
After careful review, the Committee voted unanimously in favor 
of Mr. Barreto and on July 25, 2001, he was confirmed by a 
unanimous vote of the Senate as the 21st Administrator of the 
Small Business Administration. Formerly Vice Chairman of the 
United States Hispanic Chamber of Commerce, Mr. Barreto lived 
much of his life in California where he served on the Board of 
the Latin Business Association and worked to increase the 
organization's membership and revenue.
            Thomas M. Sullivan
    On October 16, 2001, the Committee held a hearing to 
consider the nomination of Thomas M. Sullivan for the position 
of Chief Counsel for Advocacy at the Small Business 
Administration. A unanimous Committee vote in favor of Mr. 
Sullivan moved his nomination to the Senate floor, where he was 
confirmed by unanimous consent on January 25, 2002.
    Mr. Sullivan was formerly with the National Federation of 
Independent Businesses (NFIB) where he served as Executive 
Director of the Legal Foundation as the Regulatory Policy 
Council. Prior to this time at NFIB, Mr. Sullivan worked as an 
attorney at the U.S. Environmental Protection Agency and the 
Department of Justice.
            Melanie R. Sabelhaus
    On February 27, 2002, the Committee held a hearing on the 
nomination of Melanie Sabelhaus to be Deputy Administrator the 
Small Business Administration. Ms. Sabelhaus's nomination was 
approved by the Committee and confirmed by the full Senate on 
April 8, 2002.
    Melanie Sabelhaus became an expert on business through her 
experiences as a business owner. Formerly an executive with 
IBM, she also served on the Board of Directors for 
organizations such as United Way, The Alzheimer's Association 
of Maryland, and the Nantucket Historical Society.
            Harold Damelin
    On September 3, 2002, President Bush nominated Harold 
Damelin to serve as Inspector General of the Small Business 
Administration. At the time, the position was still occupied by 
the nominee for Inspector General of the Department of 
Agriculture, Phyllis K. Fong. Because Ms. Fong's nomination had 
not been acted on by the Committee on Agriculture, the 
Committee on Small Business and Entrepreneurship decided not to 
consider Mr. Damelin's appointment until the SBA Inspector 
General's position was vacant. When Ms. Fong's nomination for 
the Department of Agriculture was confirmed, insufficient time 
remained in the 107th Congress for this Committee to hold a 
hearing on Mr. Damelin's nomination.

                       Energy and the Environment

    There are an estimated 25 million small businesses in this 
country, and they account for more than half of all the 
commercial energy used in North America. In the last couple of 
years, small businesses have suffered crippling financial 
hardships because of price spikes and unreliability. They could 
have been saving billions if the Federal government used its 
resources to (1) educate small businesses about practices that 
save energy and (2) to facilitate purchases of energy-efficient 
equipment. Chairman Kerry increased the Committee's focus on 
the interplay between small businesses, innovation, job 
creation, and the nation's environmental and energy goals. 
Through hearings and legislation, he raised awareness of the 
important role small businesses play as innovators and risk-
takers creating technologies to reduce consumption, pollution, 
and reliance on foreign oil, as well as their role as consumers 
who reduce business costs and improve efficiency by using the 
innovative energy-efficient technologies. This would be 
possible if the Small Business Administration, the 
Environmental Protection Agency and the Department of Energy 
would actively coordinate their efforts to educate small 
businesses.

Hearing: ``The Business of Environmental Technology''

    On August 1, 2001, Chairman Kerry held a hearing regarding 
the business of environmental technology. The purpose was to 
highlight the role of technological innovation in meeting 
environmental goals, the role of small businesses in producing 
that innovation, and issues facing small businesses in the 
environmental field. The witnesses represented experts in the 
energy field and the energy needs of small business.

Field Hearing: ``The Energy Crisis: Taking the Power Out of Small 
        Businesses''

    On June 23, 2001, the Committee held a field hearing in 
Seattle, Washington, to examine how the energy crisis was 
affecting small businesses and the need for injured small 
businesses to access working capital through the Small Business 
Administration's economic injury disaster loans. On the West 
Coast, the unreliability and price spikes of electricity and 
natural gas hurt small businesses.
    The hearing consisted of one panel with four witnesses: a 
manufacturer, a restaurant owner, a utility company 
representative, and an expert on energy efficiency.
    Mr. Duane Britschgi, President and General Manager of Atlas 
Foundry and Machine Co., one of the premier steel foundries in 
North America located in Tacoma, Washington, represented the 
problems facing manufacturers, such as electricity rate hikes 
of 58 percent, and the savings they realized through 
conservation efforts. He testified about the impact of 
unregulated power rates and the subsequent energy surcharges 
ranging from 45 to 75 percent. He called on the Federal 
government to bring the crisis under control by capping prices 
and revising national energy policy. Mr. Britschgi specifically 
noted that the U.S. should not have allowed its electrical 
generation capacity to fall below 10 percent, versus that of 
Europe at 20 percent, because it created a severe supply and 
demand issue at the slightest energy upset.
    Ms. Diane Symms, President and Owner of Lombardi's Cucina 
Italian Restaurant Group in Seattle, Washington, testified 
about how energy intensive the hospitality industry is because 
of refrigeration, air conditioning and lighting, making it 
reliant upon electricity, natural gas and water. In the Seattle 
region ofWashington, her company had suffered electricity cost 
increases of as high as 30 percent and natural gas as high as 65 
percent. She discussed the benefits of conservation, and called on the 
Government to ensure a constant supply of energy and to develop new and 
innovative sources of energy.
    Mr. Charles Valentin, Assistant Energy Management Analyst 
of the Smart Business Program for the utility, Seattle City 
Light in Seattle, Washington, works directly with small 
businesses to help them use electricity more efficiently. The 
program is a model for how the country can increase energy 
conservation through direct financial assistance to help offset 
the cost of energy-efficiency upgrades and to overcome barriers 
preventing businesses from making investments that provide 
long-term benefits. The company has served more than 700 small 
businesses, investing $1.1 million in financial incentives, 
resulting in annual energy savings that are the equivalent of 
powering 650 homes and saving more than $260,000 annually. 
Seattle City Light has been successful because it developed a 
simple rebate format that requires little paperwork and staff 
time. Mr. Valentin urged the Congress to target Federal 
financial assistance for energy efficient investments so that 
more utilities will get involved and also to target Federal 
funding for energy auditing services that help businesses 
identify cost-effective energy efficient investments, changes 
in operations, maintenance, and behavior.
    Mr. Dave Sjoding, Acting Director of the Washington State 
University (WSU) Energy Program in Olympia, Washington, is an 
expert in energy efficiency and provided objective information 
on energy and resource efficiency to businesses, government and 
individuals. He urged the Congress to encourage the 
establishment of product codes and standards that increase 
energy efficiency, such as for cars, and to fund more research 
and development of energy efficient technologies. All the 
witnesses were extremely supportive of Congress passing S. 295, 
the Small Business and Farm Energy Emergency Relief Act of 
2001. Chairman Kerry advocated the witnesses' recommendations 
as part of the Senate's National energy debate.

Amendment No. 3099 to the Energy Policy Act of 2002

    On April 10th, 2002, Chairman Kerry, along with Senator 
Landrieu, introduced this Amendment 3099 to promote energy 
efficiency in small businesses. The amendment directed the 
Department of Energy (DoE) and the Environmental Protection 
Agency (EPA) to make a special effort to reach out to small 
businesses when the agencies promote the Energy Star program. 
The amendment also directed the SBA's disaster loan program and 
FEMA to promote Energy Star products and directed the SBA to 
work with the DoE and the EPA to help finance through the SBA's 
loan programs qualified businesses that need equipment upgrades 
through the SBA's loan programs. The amendment was agreed to by 
a voice vote in the Senate, but the entire bill died in 
conference.

Amendment No. 3152 to the Energy Policy Act of 2002

    On April 18, 2002, Senator Landrieu introduced, and 
Chairman Kerry cosponsored, Amendment No. 3152 to S. 517, the 
Energy Policy Act of 2002. The purpose of the amendment was to 
assist small businesses in becoming more energy efficient. The 
amendment directed the SBA to develop and coordinate a program 
that (1) educates small firms about the cost-benefits and 
business advantages of being energy efficient, and (2) that 
identifies financing options for energy efficiency upgrades. 
The amendment also directs other Federal agencies to increase 
their work with small businesses to research and develop 
innovative energy efficient products. The amendment was adopted 
in the Senate by Unanimous Consent, but the entire bill died in 
conference.

                              Procurement

    The Small Business Administration was officially 
established in 1953--largely as a response to the pressures of 
World War II and the Great Depression--to foster a strong and 
varied supplier base and to help struggling small businesses 
obtain a ``fair portion'' of government contracts, as well as 
compete against a growing number of big businesses across the 
nation. Today, the SBA and the Senate Committee on Small 
Business and Entrepreneurship, in its oversight and legislative 
capacities, continue to seek to improve opportunities for small 
businesses in the Federal procurement arena. In the wake of the 
terrorist attacks of 9/11 and with the continued fight against 
terrorism, the importance of small business contracting to the 
diversity and stability of our economy cannot be overstated.
    While procurement reform in the early and mid'-90s 
attempted to adequately protect the interests of small 
businesses, contract bundling, increased use of the GSA supply 
schedule, cut backs in procurement personnel, and limitations 
on certain procurement programs in response to the Adarand 
decision have had a devastating effect on small businesses and 
their ability to do business with the Federal government. 
During the 107th Congress, the Committee on Small Business and 
Entrepreneurship spent much of its time addressing these 
problems and working to protect and increase the role small 
businesses play in the government procurement process.

The Office of Small and Disadvantaged Business Utilization

    After learning that the Deputy Secretary of the Department 
of Housing and Urban Development (HUD) was moving the 
Department's director of the Office of Small and Disadvantaged 
Business Utilization (OSDBU) from the direct oversight of the 
Secretary, Chairman Kerry sent a letter asking the Deputy 
Secretary to provide a legal basis for the move. As required by 
the Small Business Act, the Director of the OSDBU at each 
agency must be ``responsible only to, and report directly to, 
the head of such agency or to the deputy of such head,'' with 
an exception for the Department of Defense (15 U.S.C. 
644(k)(3)). After receiving the letter, HUD congressional 
affairs informed the Committee that the OSDBU office was moving 
back to the direct oversight of the Secretary of HUD.
    To ensure that other agencies were also complying with the 
law, the Committee sent out an inquiry on November 28, 2001, to 
21 major Federal agencies asking them to provide the Committee 
with a description of the OSDBU's position within the 
organization and to whom the OSDBU Director reports on a daily 
basis. Information received by the Committee indicated that 
some agencies have been subjecting the OSDBU Director to 
bifurcated reporting relationships for administrative and 
budgetary matters. Upon receiving and reviewing the responses 
(and following up with several agencies) the Committee believed 
at least half of the agencies were out of compliance with 
section 15(k) of the Small Business Act. To further investigate 
the matter, Chairman Kerry requested that the GAO conduct a 
study that would look further into the agencies' compliance 
with section 15(k) and also at the effectiveness of each OSDBU 
office. The GAO study is also examining how the law applies to 
the Executive Office of the President and its 11 staff offices, 
including the Office of Management and Budget, and the OSDBU 
director at the Department of Defense. The GAO estimated that 
the study will be complete by the middle of 2003. The oversight 
involved in this issue led to the introduction of S. 2753, the 
Small and Disadvantaged Ombudsman Act.

The Office of Small and Disadvantaged Business Utilization and the 
        Government Prime Contracting Goal

    Chairman Kerry introduced the Small and Disadvantaged 
Business Ombudsman Act, S. 2753, on July 18, 2002, following 
the above-mentioned series of correspondence with various 
agency heads and small-business advocacy groups. The bill 
established a Small and Disadvantaged Business Ombudsman for 
Procurement (SDB Ombudsman) at the SBA and strengthened the 
Office of Small and Disadvantaged Business at each Federal 
agency. The legislation also raised the Federal government-wide 
procurement goal for small-business prime contracting by 7 
percentage points, phased in over three years (26 percent in FY 
2004, 28 percent in FY 2005 and 30 percent in FY 2006 and 
thereafter), setting the government-wide goal at 30 percent.
    This legislation would increase opportunities for all small 
businesses and enhance the diversified network of small 
business suppliers to meet the Federal government's needs. On 
July 24, the Committee unanimously passed S. 2753 including a 
Kerry-Bond substitute amendment that renamed the SDB Ombudsman 
as the Small Business Procurement Ombudsman and moved the 
position to the Office of Advocacy from the SBA. The position 
retained, however, all of its original authority under the 
introduced version of the legislation, except for the power to 
negotiate goal attainment plans. The goal attainment plans 
called for under the original legislation would now fall under 
the responsibilities of the SBA Administrator.
    Under the substitute bill, the Procurement Ombudsman 
remained responsible for evaluating and reporting on these goal 
attainment plans. The substitute retained the government-wide 
small-business prime contracting goalincrease from 23 percent 
to 30 percent, as well as the improvements to the Office of Small and 
Disadvantaged Business Utilization at each Federal agency and changes 
to the OSDBU Council. The report was filed on September 3, 2002, but 
the bill was not considered by the full Senate prior to the end of the 
107th Congress.

Priority Preference and Parity for the 8(a) and Historically 
        Underutilized Business Zone Programs

    In 1997, as legislation to establish the HUBZone program 
was being conducted by the Committee, then-Ranking Member Kerry 
included amendments to the legislation that changed the HUBZone 
legislation from one of HUBZone priority over the 8(a) program 
to one of equality with the 8(a) program. Shortly following the 
bill's passage, the SBA published rules on implementing the 
legislation that established a balance between the programs, a 
well as set out guidelines for a priority preference for dual-
certified small business concerns. On January 28, 2002, 
however, the SBA published proposed rules that, among other 
things, reversed its position on the priority preference.
    Because of the complexity of the rule changes, Senator 
Kerry initially wrote to SBA Administrator Barreto on February 
8, 2002, to extend the comment period from 30 days to 90 days, 
through April 29, 2002, to allow adequate time for careful 
examination of the proposal and comment by the public. The SBA 
compromised, extending the comment period to 60 days, through 
March 29, 2002.
    On March 20, 2002, Chairman Kerry wrote to Administrator 
Barreto and Associate Administrator Michael McHale describing 
his concerns with the rule's proposed changes. Chairman Kerry 
was troubled that the rule neither included language to protect 
the 8(a) program, nor a grandfather provision to protect 8(a) 
contracts and to keep awards intended for 8(a) companies within 
the 8(a) program.
    The SBA-proposed rule intended also to guide contracting 
officers when awarding contracts. It suggested that contracting 
officers look at a Federal agency's HUBZone and 8(a) 
contracting goals when making award decisions. This, Senator 
Kerry wrote, could hurt 8(a) firms, particularly because the 
Department of Defense, which is responsible for over 63 percent 
of the Federal government's procurement spending, has no 8(a) 
program goal.
    Further, there is no statutory, government-wide 8(a) goal. 
Other concerns expressed in the letter included the removal of 
a ``super-priority'' historically given to dual-certified, 
8(a)-HUBZone small businesses and the detrimental changes made 
to the definition of a HUBZone employee. It was Congress's 
intent when drafting the HUBZone legislation that dual-
certified, 8(a)-HUBZone firms would have an advantage over 
single-certified companies when bidding on contracts set aside 
for the 8(a) and HUBZone programs. The changes proposed in the 
SBA's rule to the definition of a HUBZone employee were so 
broad that traditional volunteers could be considered 
employees, which had deviated from the original definition and 
congressional intent that, if implemented, would have 
undermined the HUBZone program. In the March 20th letter 
Chairman Kerry made specific recommendations to the SBA on how 
to protect the 8(a) program and how to strike a proper balance 
between the two programs to continue parity. This led to the 
introduction of the Combined 8(a) and HUBZone Priority 
Preference Act, S. 1994.
    Along with Ranking Member Bond, Chairman Kerry introduced 
S. 1994 on March 6, 2002. The legislation established a 
preference for purposes of bidding on Federal procurement 
contracts for firms that have both 8(a) Business Development 
(BD) and HUBZone certifications, or ``dual certification.'' The 
legislation also allowed these firms to combine their price 
evaluation preferences when bidding on Federal contracts. 
Finally, the legislation increased the sole-source thresholds 
for both goods and services and manufacturing contracts by $1 
million for each category, increasing the threshold to $4 
million for goods and services contracts and to $6 million for 
manufacturing contracts. The increases apply to both the 8(a) 
BD and HUBZone sole-source thresholds.
    During the mark-up of July 24, 2002, a Bond-Kerry amendment 
made changes to the types of benefits available to firms with 
both 8(a) and HUBZone certification under restricted 
competition, as well as clarified the benefits for these firms 
for contracts under full and open competition. The amendment 
also included Senator Bond's previously filed amendment to 
clarify when a held small business concern may participate in 
the HUBZone program. This amendment reflected negotiated 
changes raised by Senator Bond during the bill's introduction 
and at the Committee's procurement Roundtable, that a 20 
percent price-evaluation preference was too high. This 
legislation retains the enhanced benefits to a small business 
that is certified as an 8(a) Business Development firm and a 
HUBZone small business concerns, as well as increases the sole-
source threshold for these firms by $1 million.
    On June 19, 2002, the Committee held a Roundtable titled 
``Are Government Purchasing Policies Failing Small Business?'' 
The Roundtable involved representatives from small business 
groups participating in Federal procurement programs, such as 
8(a), HUBZone, SDB, women-owned and veteran-owned, as well as 
representatives from the Administration. The Roundtable 
discussed general procurement policies and current legislative 
initiatives before the Committee, including S. 1994. Feedback 
from the small business participants was positive across the 
board.
    On July 24, 2002, the Committee unanimously passed S. 1994. 
The report was filed on October 1, 2002, but the full Senate 
failed to take up the bill before it adjourned for the year.

Contract Bundling

    Federal contract bundling is a long-standing problem for 
small business contractors that has gotten progressively worse 
as Agency staffing has decreased and streamlining has 
increased. After the Committee was contacted by numerous small-
business groups about small businesses being excluded by 
Federal agencies from contracts due to their ``bundled'' 
nature, Chairman Kerry introduced S. 2466, the Small Business 
Federal Contractor Safeguard Act, on May 7, 2002. The bill 
strengthened the definition of a bundled contract in order to 
close the loopholes in the existing definition and to prevent 
Federal agencies from circumventing statutory safeguards 
intended to ensure that separate contracts are consolidated for 
economic reasons, and not solely for expediency.
    The bill would have also made it harder for Federal 
agencies to consolidate small contracts that would otherwise be 
available for small-business bidders. The current definition of 
a bundled or consolidated contract does not account for all 
circumstances in which contracts can be bundled together. The 
Small Business Act requires likely bundled contracts to undergo 
market research to determine cost savings. An agency may not 
use a reduction in personnel costs alone to justify a bundled 
contract unless they are substantial. S. 2466 would have 
eliminated the term ``bundled contract'' and its definition, 
and substituted a new term, ``consolidated contract,'' meaning 
a multiple award contract or a contract for goods or services 
with a Federal agency that combines discrete procurement 
requirements from not less than two existing contracts, adds 
new, discrete procurement requirements to an existing contract, 
or includes two or more discrete procurement requirements. This 
definition eliminates the flaw in the previous definition that 
left room for varied interpretations by the Federal agencies, 
and it closed the loopholes in the current definition 
pertaining to new contract requirements and multiple award 
contracts.
    The bill also included a threshold level for triggering the 
economic research requirements for ``consolidated'' contracts 
in the Small Business Act. On July 24, 2002 the Committee 
unanimously passed S. 2466. The report was filed on October 8, 
2002, but was never taken up by the full Senate prior to 
adjournment.

Small Business Team Arrangements

    On September 26, 2001, Chairman Kerry and Ranking Member 
Bond introduced the Small Business Procurement Competition Act 
of 2001, S. 1472. The bill was accepted in its entirety, as 
Amendment No. 1694 to the Department of Defense Authorization 
bill, S. 1438, on September 26, 2001, but was not included in 
the conference report. The bill sought to help small businesses 
compete on large and bundled contracts by allowing small 
businesses to form small business-only joint ventures to 
compete for any contract over $5 million, even if the joint 
venture exceeded the size standard. To facilitate and encourage 
this, the legislation set up a 3-year pilot Small Business 
Procurement Competition Program. The bill also allowed small 
businesses to subcontract up to two-thirds of a contract if the 
contract were bundled, so long as they would subcontract to 
other small businesses and do the largest proportion of the 
work themselves. Currently, small businesses can subcontract up 
to 49 percent of a contract. Finally, the legislation set up a 
program to help promote the formation of joint ventures and 
created adatabase to help link small businesses wishing to form 
joint ventures together and changed the definition of a bundled 
contract. On October 30, 2002, the Office of Management and Budget 
issued a nine-point action plan to thwart contract bundling. It 
included a provision similar to S. 1472 that encourages Federal 
agencies to develop small business team arrangements capable of 
competing for larger contracts.

Improving Contract Bundling Reporting Requirements and Expanding 
        Participation in the Historically Underutilized Business Zone 
        Program

    In September 2001, Chairman Kerry and Ranking Member Bond 
included an amendment in the FY 2003 National Defense 
Authorization Act, S. 1438, making changes to the data 
collection and report provisions for bundled contracts and to 
eligibility requirements of the HUBZone program. First, the 
Amendment No. 1695 revised the reporting requirements for the 
Department of Defense market analyses to make them more 
systematic and meaningful. The legislation also required that 
the SBA Administrator report to the congressional small 
business committees, including an assessment of how to improve 
current and future market analyses.
    Second, the amendment made it easier for small businesses 
to participate in the HUBZone program if its stock is publicly 
traded. Under current law, publicly traded companies are unable 
to participate in the HUBZone program. Unfortunately, the 
Kerry-Bond amendment was not retained in the DOD Authorization 
Conference Report.

                   Technology, Research & Development

    The Committee believes strongly in the role of small 
business in our nation's effort to maintain its lead as the 
innovator of technology. Small businesses are noted for a 
higher success rate in commercializing technologies, and they 
research and develop technology and processes less expensively 
and faster. Innovations by small business contribute to our 
country having the best military intelligence and medical 
technology.
    In the 107th Congress, the Committee continued its support 
of small business technological innovation, which benefits the 
country by contributing to our having the best military 
technology, intelligence technology, technology to improve our 
quality of life from health revolutions in breast cancer 
detection and surgery to equipment. And it all makes our 
economy stronger.

Reauthorization of the Small Business Technology Transfer Program

    On May 9, 2001 Senator Kerry, along with Senator Bond, 
introduced S. 856, the Small Business Technology Transfer 
(STTR) Program Reauthorization Act of 2001. The purpose of the 
legislation was to (1) reauthorize the program for eight years; 
(2) double the percentage that participating Departments and 
Agencies set aside for STTR R&D from .15 percent to .3 percent 
starting in FY 2004; (3) increase the Phase II grant award 
amount from $500,000 to $750,000 starting in FY 2004, which 
coincides with the funding increase and is consistent with 
Phase II SBIR awards; (4) require the participating agencies to 
implement an STTR outreach program to research institutions in 
conjunction with any such similar SBIR outreach; and, (5) 
strengthen the data collection requirements regarding awards 
and the data rights for companies and research institutions 
that conduct STTR projects, consistent with changes made to the 
SBIR program in the 106th Congress.
    On June 21, 2001, the Committee held a hearing to review 
reauthorization of the Small Business Technology Transfer 
program and to seek feedback on S. 856, the Small Business 
Technology Transfer Program Reauthorization Act of 2001. On 
July 19, 2001, the Committee considered the bill and voted 
unanimously in favor of its passage. It passed the full Senate 
on September 14, 2001. The House companion to the bill, H.R. 
1860, which contained S. 856 in its entirety, was passed on 
September 26, 2001 and sent to the President for his signature. 
The legislation was enacted as PL 107-50.

Small Business Innovation Research Program and Small Business 
        Technology Transfer Program Foreign Patent Protection

    On August 2, 2001, Chairman Kerry introduced S. 1323, the 
SBIR and STTR Foreign Patent Protection Pilot Program Act. The 
bill sought to establish a five-year pilot program to help 
protect the intellectual property of SBIR and STTR companies 
that try to export their technology and need financial 
assistance to help offset the high costs of patent filing in 
foreign markets.
    Ultimately, the goal was to establish a revolving fund, 
with revenues generated from the sales and/or licensing fees 
that companies realize from the patented technology. At the 
STTR hearing the Committee held on June 21, 2001, two 
businesses and the technology transfer office of Northeastern 
University in Massachusetts commented favorably about the need 
for this assistance. The bill (1) established a five-year 
pilot; (2) limited grants to a maximum $25,000; (3) limited 
each company to one grant; (4) required the company to already 
have U.S. patent protection in order to be eligible for the 
grant; (5) generated revenue for the revolving fund through 
royalty fees of 3 to 5 percent, with a cap of three times the 
amount of the grant the business received; and (6) authorized 
appropriations for five years, starting with $2.5 million in FY 
2003, in order to fund 100 grants of $25,000, and ending with 
$10 million in FY 2007, in order to fund 400 grants of $25,000.

                        Education & Development

    The Committee's role in overseeing the numerous SBA 
programs designed to protect the interests of small businesses 
has led to the development of several programs aimed at giving 
small businesses the tools they need to compete and succeed. Of 
great importance to this endeavor is the capacity by which the 
SBA can improve the success rate of small businesses through 
education and development.
    The Committee believes programs such as the Small Business 
Development Centers (SBDCs) and the Tribal Business Information 
Centers (TBICs) are vital to this cause. With deep budget cuts 
affecting a majority of the SBA's programs, the Committee 
looked closely at a variety of education and development 
programs to continue their success and improve upon their 
shortcomings.

Vocational and Technical Entrepreneurship Training

    On July 19, 2001, the Subcommittee on Workforce, 
Empowerment and Government Programs of the House Committee on 
Small Business held a hearing on pending legislation, including 
H.R. 2666, the Vocational and Technical Entrepreneurship 
Development Act, which was introduced by Congressman Brady of 
Pennsylvania.
    The hearing demonstrated a need for expanded 
entrepreneurship training services at other Small Business 
Development Center (SBDC) locations. On August 1, 2001, the 
House Committee on Small Business considered H.R. 2666, passed 
it without amendment and ordered it reported. On October 2, 
2001, the full House considered H.R. 2666 under suspension of 
the rules. It was subsequently agreed to by voice vote.
    During consideration of H.R. 2666 in the Senate Committee 
on Small Business and Entrepreneurship on July 24, 2002, the 
Ranking Republican, Senator Bond, raised concerns that the 
Senate Committee had not adequately considered the National 
Small Business Regulatory Assistance Act.
    In response to these concerns, Committee Chairman Kerry 
proposed holding a Roundtable on the legislation to alleviate 
these concerns in order to move forward with the Committee 
vote. On August 1, 2002, the Committee held a Roundtable titled 
``Promoting Small Business Regulatory Compliance and 
Entrepreneurial Education--the Role of the SBDC Network.'' 
During this Roundtable, the Senate Committee received evidence 
that H.R. 2666 would provide adequate resources to SBDCs, so 
that they could provide technical assistance to secondary 
schools and post-secondary vocational and technical schools to 
develop and implement curricula to promote vocational and 
technical entrepreneurship.
    Small business representatives at the Roundtable also 
stressed the need to provide such assistance as an important 
addition to curricula that is merely skills-based. Small 
business groups such as the National SmallBusiness United 
supported H.R. 2666, as well as leading educational institutions, such 
as the Wharton School of Business at the University of Pennsylvania, 
and the Association of Small Business Development Centers.
    The purpose of H.R. 2666 was to assist the development and 
implementation of curricula that would encourage skilled 
persons to start their own businesses and to provide needed 
entrepreneurial training to support the success of such 
businesses. The Act provided the necessary entrepreneurial 
support to expand the career opportunities for persons 
receiving vocational training and thus use their newly gained 
skills to become the successful owners of their own business.
    To accomplish this, the bill would have established a 3-
year pilot program to be headed by the Administrator of the SBA 
and would have offered grants to state SBDCs with the minimum 
grant being $200,000. The legislation also designated the 
Association of Small Business Development Centers as a 
clearinghouse for the collection of information and expertise 
regarding vocational and technical entrepreneurship programs. 
H.R. 2666 was voted out of the Senate Committee by an 18-1 
margin, with Senator Enzi dissenting, on July 24, 2002. The 
report was filed on October 9, 2002. The bill was not addressed 
by the full Senate prior to adjournment.

Native American Small Business Development

    In 1995, the SBA was granted $1.2 million in funding from 
the Bureau of Indian Affairs to start the Tribal Business 
Information Center (TBIC) program. Since then, the program has 
struggled to achieve its mission due to inadequate resources. 
In 2002, Tribal Lands in only six states were served under the 
program, despite repeated requests from Tribal Leaders 
elsewhere for additional TBICs. The lack of resources means 
that the 16 TBICs have received an average of only $33,000 in 
funding, to cover all expenses, including staffing. Although 
designed to provide culturally tailored business development 
assistance to prospective and current small-business owners on 
reservations, the lack of resources has hampered this program 
from meeting its promise to the Native American community.
    During the 107th Congress, the issue of funding for the 
Tribal Business Information Center (TBIC) program became even 
more dire. On January 24, 2002, Chairman Kerry, along with five 
other senators, sent a letter to SBA Administrator Hector 
Barreto and the Office of Management and Budget (OMB) Director 
Mitch Daniels to urge them to provide the TBICs with $2.5 
million and a specific ``line-item'' in President Bush's fiscal 
year 2003 budget request. Then, as the program was set to run 
out of money on March 31, 2002, Chairman Kerry sent a 
bipartisan letter, cosigned by nine senators, on March 22, 
2002, to SBA Administrator Barreto requesting that the Small 
Business Administration begin the reprogramming process in 
order that the Tribal Business Information Center program could 
continue receiving funding for fiscal year 2002. To remain 
operational in the second half of the fiscal year, the program 
required $200,000. The SBA failed to respond, leaving the TBIC 
program without the Federal component of its funding due to 
``budgetary contracts'' at the SBA.

Funding the Tribal Business Information Center Program

    In the wake of the Tribal Business Information Centers 
(TBICs) losing their funding, Senator Tim Johnson of South 
Dakota and Chairman Kerry introduced S. 2335, the Native 
American Small Business Development Act, on April 25, 2002. The 
bill was designed to place SBA services for Native Americans on 
par with that of other specialized groups, such as women-owned 
small businesses. It made statutory the Office of Native 
American Affairs (ONAA) at the SBA, expanded on the TBIC 
program at the SBA, and changed the name to Native American 
Business Centers. The legislation also established two pilot 
grant programs to assist Native American communities, although 
three grant programs existed in the original legislation.
    On April 30, 2002, the Committee held a joint hearing with 
the Committee on Indian Affairs. The late Senator Paul 
Wellstone of Minnesota co-chaired the hearing in Chairman 
Kerry's absence with Chairman Inouye of the Indian Affairs 
Committee. The hearing focused on general economic development 
in Native American communities and the Native American Small 
Business Development Act. Senator Johnson testified before the 
committees on the legislation.
    A mark-up of the legislation was held on July 24, 2002, 
during which a Kerry-Bond amendment eliminated the proposed 
American Indian Tribal Assistance Center Grant pilot program, 
incorporated a previously filed Kerry amendment to improve the 
Native American Development Grant pilot program, and 
transferred $1 million from the Native American Small Business 
Development Program created under the legislation to the Native 
American Development Grant pilot program. It also made a number 
of technical and conforming corrections. The bill passed 18-1, 
but was not considered by the full Senate prior to adjournment.

                         Disaster Loan Program

    During the 107th Congress, small businesses across the 
country suffered economic injury because of energy price spikes 
and severe drought. In order to help these companies continue 
to operate and mitigate layoffs, Chairman Kerry introduced and 
advocated for legislation to make it possible for qualifying 
small businesses to access the SBA's economic injury disaster 
loans. Economic injury disaster loans give affected small 
businesses necessary working capital until normal operations 
resume, or until they can restructure or change the business to 
address the market changes.
    In addition to needs for disaster assistance for small 
businesses, the Committee responded to calls from small 
businesses complaining about the sale of disaster loans by the 
SBA to private entities, as well as to requests and initiatives 
from their Senators and Congressman to eliminate disaster loans 
from the SBA's asset sales. At a minimum, members requested a 
moratorium on the sale of disaster loans in order to 
investigate the treatment of borrowers from secondary market 
lenders.

Energy Disaster Assistance

    On February 8, 2001, Senator Kerry introduced S. 295, the 
Small Business and Farm Energy Emergency Relief Act of 2001. 
The bill had bi-partisan support, with 34 Senate cosponsors, as 
well as a companion bill in the House, H.R. 1010, which was 
introduced by Congressman Tom Udall of New Mexico. The purpose 
of the bill was to provide emergency relief, through 
affordable, low-interest Small Business Administration Economic 
Injury Disaster loans, to small businesses adversely affected 
by, or likely to be adversely affected by, significant 
increases in the prices of heating oil, propane, kerosene, 
natural gas, or electricity.
    Many small businesses are dependent upon heating oil, 
propane, kerosene, natural gas and electricity either because 
they sell or distribute the product, because they use it to 
heat and cool their facilities or as part of their business, or 
because they depend on it to refrigerate their products and 
provide energy to wash dishes and linens. The significant and 
unforeseen rise in the price of these fuels, compounded by in 
many regions of the U.S. by cold snaps and slowed economic 
conditions in the winter of 2000/2001, threatened the economic 
viability of many small businesses.
    For those businesses that were in danger of or were 
suffering from significant economic injury caused by crippling 
increases in the costs of heating fuels and electricity, access 
to capital was a critical need. However, commercial lenders 
typically weren't making loans to these small businesses 
because they often did not have the increased cash flow to 
demonstrate the ability to repay the loan.
    To exacerbate the situation, banks had tightened their 
lending to small businesses by 45 percent at that time, 
according to the Federal Reserve Board's quarterly survey on 
lending practices that was released in February 2001. Senator 
Kerry's legislation responded to the energy problems during the 
107th Congress by seeking to amend the SBA economic injury loan 
program to give small businesses access to low-interest 
disaster loans that would help them keep their monthly payments 
low and ease cash flow problems until business returned to 
normal.
    As amended, the emergency bill included (1) a proposal by 
Senators Boxer and Feinstein to include electric energy in the 
scope of the bill that originally focused on heating fuels; (2) 
a proposal by Senator Levin to allow the loan proceeds to be 
used for small businesses to convert their energy systems from 
using heating fuels to usingrenewable or alternative energy 
sources; (3) a proposal by Senators Kohl and Harkin to extend similar 
loan assistance to small agricultural producers through the Department 
of Agriculture's emergency loan program; (4) a proposal by Senator Bond 
to sunset the program after two years, and to conduct a study of the 
program's usage to help Congress assess the merits of reauthorization; 
(5) a proposal by Senator Enzi to expand Senator Levin's amendment by 
including ``co-generation'' in the list of renewable or alternative 
energy sources; and, (6) technical and conforming amendments made in 
consultation with the Administration, to make the program as consistent 
as possible with the existing disaster loan program.

Drought Disaster Assistance

    On July 16, 2002, Chairman Kerry and Senator Hollings 
introduced S. 2734, the Small Business Drought Relief Act, in 
response to concerns raised by Governor Hodges of South 
Carolina and supported by 15 other governors whose states were 
suffering severe drought. Sixteen governors--Governor Hodges of 
South Carolina, Governor Easley of North Carolina, Governor 
Barnes of Georgia, Governor Foster of Louisiana, Governor 
Musgrove of Mississippi, Governor Perry of Texas, Governor Wise 
of West Virginia, Governor Patton of Kentucky, Governor 
Glendening of Maryland, Governor Holden of Missouri, Governor 
Keating of Oklahoma, Governor Sundquist of Tennessee, Governor 
Warner of Virginia, Governor Siegelman of Alabama, Governor 
Huckabee of Arkansas, and Governor Guinn of Nevada--asked the 
Congress to pass this drought relief, but they got no 
cooperation from a small minority of Senators. The bill had bi-
partisan support of 22 senators. The purpose was to help small 
non farm-related small businesses hurt by drought, eliminate 
contradictory statutory interpretations, and clarify existing 
law and Congressional intent.
    As amended, the bill sought the following changes to the 
Small Business Act. To address the SBA's argument that drought 
victims are not eligible for disaster loans because a drought 
is not a disaster by definition, the bill adds the word 
``drought'' to the definition of disaster in the Small Business 
Act. In order to address concerns that adding drought would 
expand the SBA's disaster program too broadly, the Kerry-Bond 
substitute amendment specifies that assistance for drought 
victims is only available to small businesses, not home owners, 
and that they are only eligible for SBA economic injury 
disaster loans, not physical disaster loans. While the 
Committee believes that the SBA already has the authority to 
make economic injury disaster loans to ``any small business 
concern'' in a declared disaster area and should treat all such 
businesses equally, in order to clarify that authority as it 
applies to drought victims, the Kerry-Bond substitute amendment 
directed the SBA to make economic injury disaster loans 
available to both farm-related and non farm-related small 
businesses hurt by drought.
    The Kerry-Bond substitute amendment also included a 
provision to ensure that small business drought victims meet 
requirements demonstrating substantial economic injury caused 
by drought. Last, the Kerry-Bond substitute preserved a state 
governor's role in initiating a drought declaration rather than 
limiting such authority to actions by the U.S. Secretary of 
Agriculture.
    On July 24, 2002, the Committee on Small Business & 
Entrepreneurship considered S. 2734, the ``Small Business 
Drought Relief Act.'' The Committee adopted by unanimous voice 
votes S. 2734, including a substitute amendment offered by the 
Chairman of the Committee, Senator Kerry, and the Ranking 
Republican, Senator Bond, an amendment offered by Senator Carl 
Levin to include in the definition of ``disaster'', ``low water 
levels on the Great Lakes,'' as a disaster term, and an 
amendment offered by Senators Edwards and Allen to require the 
Administrator of the SBA to respond to disaster declaration 
requests from governors within 30 days. Despite the bill's bi-
partisan support and its unanimous endorsement by the 
Committee, the Administration opposed its passage and persuaded 
some Republican Senators to block its enactment.
    The Committee negotiated for months with the Administration 
to reach agreement in order to pass the emergency drought 
relief, and finally the Office of Management and Budget agreed 
to limit the cost of the bill $9 million in authorized 
appropriations, which would fund approximately $40 million of 
such disaster loans annually. In spite of this agreement, one 
Republican senator continued to block the bill's passage, 
causing the bill to die when Congress recessed for the year.
    On December 13, 2002, Chairman Kerry sent a letter to 
Administrator Barreto requesting that the Agency provide a copy 
of its legal opinion regarding its interpretation of the Small 
Business Act with regards to making economic injury disaster 
loans to non agriculture-related small businesses. The SBA has 
interpreted its authority under the Federal statute, paragraph 
7(b)(2) of the Small Business Act, to apply only to farm-
related small businesses when there is a drought disaster 
declaration, and the Chairman and Ranking Member remain 
concerned that the SBA's interpretation of its authority 
narrows the scope of disaster relief assistance that the 
Congress intended in passing the law. After numerous requests 
from the Committee during the second session of the 107th 
Congress, the Administration finally provided the opinion to 
the Committee on December X, 2002, well after the end of the 
107th Congress.

                         Regulatory Assistance

    The Committee believes that providing resources and 
guidance on complying with government regulations is 
particularly important to small businesses. Understanding and 
following the countless number of Federal regulations can be 
tricky for small firms, especially small companies with few 
employees. Small businesses often face a daunting task when 
seeking advice on how to comply, let alone actually complying 
with Federal regulations, particularly when implementation may 
vary in different regions of the country, or from state to 
state. Many small businesses fail to comply with important and 
needed labor and environmental regulations not because they 
want to break the law, but because they are unaware of the 
actions they need to take to comply.
    During the 107th Congress, the Committee continued to 
address this issue of how best to educate small businesses 
about laws and regulations, the most effective ways to help 
them comply with existing laws, and what ways Congress can 
strike a delicate balance between easing the compliance burden 
and upholding necessary protections.

Regulatory Compliance Assistance

    Joining with Senator Cleland of Georgia, Chairman Kerry 
introduced S. 2483, the National Small Business Regulatory 
Assistance Act. The legislation called for the establishment of 
a pilot project in which 20 selected Small Business Development 
Centers (SBDCs) would provide regulatory compliance assistance 
to small businesses. The pilot project was to be administered 
by the Small Business Administration, which would be authorized 
to award grants between $150,000 and $300,000 to selected 
SBDCs. The bill also required that Congress receive a progress 
report annually on the pilot program's accomplishments at each 
SBDC. Under the bill, SBDCs would need to form partnerships 
with Federal compliance programs, conduct educational and 
training activities and offer free-of-charge compliance 
counseling to small business owners. Further, the measure was 
designed to guarantee privacy to those who receive compliance 
assistance. This privacy provision was also extended to all 
small businesses that seek any assistance from their local 
SBDC. The National Small Business Regulatory Assistance Act 
provided small businesses with the support they need to 
navigate the often complicated world of Federal regulations.
    On July 24, 2002, the Committee passed S. 2483 with one 
``nay'' vote from Senator Mike Enzi of Wyoming and without 
amendments. On August 1, 2002, the Committee conducted a 
Roundtable titled ``Promoting Small Business Regulatory 
Compliance and Entrepreneurial Education--the Role of SBDC 
Network.'' The Roundtable was held to supplement the 
Committee's record on pending legislation, S. 2483 and H.R. 
2666. While each piece of legislation was drafted to provide 
additional resources to the Small Business Development Center 
network, S. 2483 specifically addressed helping small 
businesses with regulatory compliance. The report was filed on 
October 9, 2002. The full Senate did not take up S. 2483.

Regulatory Impacts on Small Businesses

    On April 24, 2001, the Committee held a hearing titled 
``Protecting America's Small Business Rights: SBREFA on Its 5th 
Anniversary.'' During the hearing, the Committee heard from 
small business owners, officials and leaders from the General 
Accounting Office, the Small Business Administration, National 
Small Business United, the Environmental Protection Agency, and 
the Department of Commerce. Issues addressed at the 
hearingincluded the cost of regulations as monitored by the Small 
Business Regulatory Enforcement Fairness Act and the Regulatory 
Flexibility Act, regulations and Federal agencies that overlook various 
small business sectors when drafting regulations, and how to best 
ameliorate the situation and protect small business interests. 
Panelists at the hearing gave testimony on how the SBA Office of 
Advocacy could better facilitate regulatory compliance and addressed 
the disproportionate impact regulations often have on small businesses.

                               Tax Issues

    Small businesses have been the engine of economic growth 
across the nation for the last decade. This country's ability 
to foster entrepreneurship also has been an integral part of 
our success in creating high-wage jobs for America's future. 
During the 107th Congress, the Committee developed measures to 
insure that the Federal tax code effectively assisted the 
creation and growth of small businesses and family farms. 
Income from small businesses is subject to Federal taxation 
like other income; however, small businesses and their larger 
counterparts are not always treated equally by the tax code. 
The Committee supported a number of important changes in tax 
law that, if enacted, could have a dramatically positive effect 
for small businesses and the economy.

Joint House-Senate Small Business Committee Roundtable on Tax Agenda 
        for Small Business

    On April 4, 2001, the Senate and House Small Business 
Committees held a Roundtable on a proposed tax agenda for small 
business that focused on small business tax relief, tax 
simplification and taxpayer rights and protections. Among the 
initiatives discussed during the tax relief section of the 
Roundtable were modifying the estate tax, reducing the 
depreciation recovery period, lowering individual income tax 
rates, reforming the Alternative Minimum Tax and the allowing a 
greater deductibility of health insurance expenses.
    The tax simplification section of the Roundtable discussion 
focused on capital gains tax relief, increasing the expensing 
limitation, making the Research and Experimentation tax credit 
permanent and simplifying cash versus accrual accounting. 
Finally, the taxpayer rights section of the Roundtable focused 
on reforming the Independent Contractor regulations, increasing 
flexibility for small business pensions and modifying the tax 
treatment of investments in debenture small business investment 
companies (SBICs) to encourage greater investments.

The Affordable Small Business Stimulus Act of 2001

    In response to many of the important tax issues raised at 
the Joint Roundtable, Chairman Kerry introduced S. 1676, ``The 
Affordable Small Business Stimulus Act of 2001.'' The bill 
contained the following provisions that:
     Increased the expensing limitation for small 
businesses to $35,000, and increased the phase-out level, above 
which expensing would not be allowed, to $350,000. Both the 
$35,000 and $350,000 limits would be increased annually for 
inflation beginning in calendar year 2003.
     Modified and expanded a 1993 law regarding new 
equity investments in small businesses' stock. Under the Kerry 
bill, new investments in companies with capitalization of up to 
$100 million at the time of investment would have a 75 percent 
capital gains exclusion if the investments were held at least 
three years. The exclusion for such investments would be 100 
percent if they were made in a business involved in certain 
critical technologies, or for investments in specialized small 
business investment companies. Both the 75 and 100 percent 
exclusion levels would be available for investments made by 
both individuals and corporations. In addition, the rollover 
period for such investments would be increased from 60 days to 
180 days.
     Reduced the depreciation recovery period for 
computers or peripheral equipment from five years to three, and 
for software from three years to two. This change would be 
permanent.
     Made the health insurance expenses of the self-
employed fully tax deductible in 2001, as opposed to 2003 as 
permitted by current law.
     Included the Single Point Tax Filing Act, which 
would simplify the tax filing process for employers by allowing 
the Internal Revenue Service and State agencies to combine, on 
one form, both State and Federal employment tax returns.
     Extended the existing income averaging provisions 
to cover fishing as well as farming.
     Modified the tax treatment of investments in 
debenture small business investment companies (SBICs), so they 
are less likely to create unrelated business taxable income 
(UBTI) liability. In so doing, the bill would encourage greater 
investment in SBICs, which provide critically needed venture 
capital to emerging small businesses. These venture capital 
funds are sorely needed in today's stalled economy.
    The Senate Finance Committee did not consider this 
legislation during the 107th Congress.

The Single Point Filing Act

    America's small businesses, which employ more than half of 
the workforce, are drowning in tax paperwork. They are 
currently responsible for filing Federal and state employment 
taxes and wage reports as well as unemployment insurance 
reports. These reports obligate employers to understand and 
comply with diverse and often conflicting state and Federal 
laws. Just to keep up with these requirements, employers must 
maintain separate wage records for Federal income tax 
withholding, state income tax withholding, social security, and 
unemployment insurance. This reporting must be provided to 
government agencies at different times using different forms. 
If the employer does business in more than one state, the 
reporting burdens are often compounded. The financial burden 
associated with employer tax, wage, and unemployment insurance 
was estimated at $16.2 billion in 1999. The Federal portion of 
these costs stood at $9.8 billion.
    Small businesses need the government to reverse course, 
which is why Chairman Kerry successfully included this 
legislation as S. Amdt. 787 during Senate consideration of H.R. 
1836, the Economic Growth and Tax Relief Reconciliation Act. 
Unfortunately, this provision was not included in the 
Conference Report to H.R. 1836. In the 108th Congress, Senator 
Kerry will continue to work to give small businesses a more 
efficient option, a single filing form, to comply with Federal 
and state regulations. This will allow small businesses more 
time to concentrate on running their business instead of 
filling out endless streams of paperwork.

The Business Retained Income During Growth Expansion Act of 2002

    New, entrepreneurial businesses are often the foundation of 
our nation's productivity gains and economic growth. Emerging 
growth companies are a major source of job creation, 
technology, global competitiveness, tax revenues, and export 
sales. Chairman Kerry introduced the Business Retained Income 
During Growth and Expansion (BRIDGE) Act (S. 1903) to help 
ensure that rapidly expanding, entrepreneurial businesses have 
access to the capital they need to continue creating jobs and 
stimulating the economy.
    A Small Business and Entrepreneurship Roundtable on this 
legislation was held on May 22, 2002. Congressman Jim DeMint of 
South Carolina introduced the House companion bill with 18 
cosponsors. The bill allowed small and mid-sized, fast-growing 
businesses to temporarily defer a portion of their Federal 
income tax liability so they could continue making new 
investments in their businesses. The two-year deferral would be 
limited to $250,000 of tax, which would be repayable with 
interest over a four-year period. The tax-deferred amount would 
be deposited in a separate trust account--a BRIDGE account--at 
a bank or other approved intermediary, and the firm could 
borrow against the deferred amount, as collateral, for business 
purposes. Eligible firms would be required to have gross 
receipts of at least 10 percent greater than the firm's average 
receipts for the prior two years, and totalannual receipts 
would be permitted to exceed $10 million. Upon sale or merger of the 
business, any remaining tax deferral would be payable at that time.
    The entrepreneurial spirit lies at the forefront of our 
economy's technological advances and dynamic innovations. The 
BRIDGE Act, by freeing entrepreneurial businesses from the 
constraints of unmet capital funding needs and empowering them 
to expand into new markets, would promote economic 
diversification and renewed growth. The Senate Finance 
Committee did not consider this legislation during the 107th 
Congress. Chairman Kerry will continue to push for 
consideration of this important legislation during the 108th 
Congress.

The Worker Investment and Retirement Education Act of 2002

    In April 2002, Chairman Kerry and Senator Olympia Snowe of 
Maine introduced the Worker Investment and Retirement Education 
Act of 2002, the first bipartisan pension reform bill to 
protect small business workers without prompting a reduction in 
benefits. Specifically, the bill would help small businesses 
provide their employees with unbiased information on the basics 
of investing, as well as personalized information to help them 
know if they are adequately preparing for their retirement 
years. The bill would apply different diversification rules 
based on the type of contribution--such as worker payroll 
deduction, employer matching contribution, or employers non- 
matching contribution--rather than the type of plan to allow 
workers to diversify their contributions once they are vested 
in a retirement plan. Finally, the bill would establish an 
Office of Pension Participant Advocacy where workers could turn 
to voice their concerns about pension policy. Unfortunately, 
the Senate Finance Committee did not consider this legislation 
during the 107th Congress.

                              Trade Issues

    The number of United States small businesses involved in 
exporting has tripled since 1987. The dollar value of small 
business exports has grown 300 percent over the period from 
1996 through 2001. Small business now accounts for 31 percent 
of the value of small business exports. Overall, 97 percent of 
all exporters are small businesses, with the most dramatic 
growth of exporters among companies employing less than 20 
people. The World Trade Organization (WTO) has the potential to 
address a wide range of global trade issues of concern to small 
businesses in the United States. During the 107th Congress, 
Chairman Kerry and Senator Olympia Snowe have worked to 
establish a small business advocate at the WTO and at the 
Office of the United States Trade Representative.

Seeking an Enhanced Role for Small Business at the World Trade 
        Organization

    In April 2001, Senators Snowe and Kerry introduced S. 714, 
which expressed the Sense of the Senate that the United States 
Trade Representative should pursue the establishment of a small 
business advocate at the World Trade Organization to safeguard 
the interests of small firms and represent those interests in 
trade negotiations involving the World Trade Organization. On 
June 27, 2001, Chairman Kerry and Senator Olympia Snowe sent a 
letter to U.S. Trade Ambassador Robert Zoellick asking for 
support in their efforts to place an advocate for small 
business within the WTO.
    Small businesses face enormous challenges in order to 
become involved in international trade and it is very difficult 
for many to compete on a level playing field. Today, less than 
one percent of U.S. small businesses are engaged in 
international trade-related activities. In the above-mentioned 
letter, the Senators stated that a small business advocate at 
the WTO would be a crucial step toward enhancing the 
involvement of small business in international trade and could 
assist in assuring international protection of international 
property rights, in settling trade disputes, and in enhancing 
small business access to e-commerce. Because the WTO is the 
principal international organization for rules governing 
worldwide international trade, it has the potential to address 
a range of global trade issues of concern to small businesses 
in the United States. Better coordination is needed between 
small businesses and advocacy agencies throughout the world. In 
August, Ambassador Zoellick responded to the June 27, 2001, 
letter saying that the WTO did not envision an advocacy role 
for small business.

                      Other Committee Initiatives


Honoring Milton Stewart

    On March 5, 2002, Chairman Kerry introduced S. Res. 216 to 
honor Milton Stewart on his 80th birthday. Mr. Stewart was the 
first Chief Counsel for the SBA's Office of Advocacy and had a 
long and noteworthy career promoting the interests of small 
business. The Resolution was passed by unanimous consent the 
same day it was introduced.

Slotting Allowances

    In the 106th Congress, the Committee addressed the issue of 
slotting allowances--fees charged by retailers to individual 
product manufacturers, which can adversely affect small 
businesses that sell their products through large retailers. 
The most common reasons for charging slotting allowances 
include insuring a retailer income for an untested product, to 
acquire shelf space, to acquire high-profile shelf space, to 
acquire exclusive shelf space, and to acquire warehouse space 
in a wholesale facility. During the 106th Congress, then-
Ranking Member Kerry brought the slotting issue to the 
attention of the Small Business Committee. The Committee held 
two hearings on slotting in September 1999 and September 2000.
    The General Accounting Office was asked to conduct a study 
on the issue, and testified that they were unable to complete 
their study because the grocery industry refused to cooperate, 
with exceptions from two mid-size grocery store chains. The 
FTC, however, released a report on the issue February 20, 2001. 
The recommendations of the FTC staff report, that is part of a 
longer study, included pursuing further an empirical study to 
contribute to enforcement actions or business guidance 
beginning with gathering basic data on current practices.
    No formal guidelines on slotting allowances were given at 
the time of the report's release. Five specific steps for 
future FTC actions in this area included (1) carefully 
reviewing exclusive contracts to determine if and how they 
affect competition, (2) examining slotting allowances and pay-
to-stay fees that can give rise to exclusionary effects, (3) 
revisiting price discrimination issues, (4) focusing inquiries 
primarily on situations that involve collusion, and (5) 
ensuring that supermarket merger policies take into account 
market power over suppliers as well as consumers. At the end of 
the 107th Congress, the full slotting study being conducted by 
the FTC was not yet complete.

The Office of Advocacy

    On February 27, 2001, Senators Kerry and Bond introduced 
the Independent Office of Advocacy Act, S. 395, to strengthen 
the Office of Advocacy at the SBA. It required each 
appropriation request submitted by the SBA to include a 
separate funding request for the Office of Advocacy and allowed 
the Office's Chief Counsel to be removed by the President after 
Congressional notification. It also required the Office to 
recommend methods for the delivery of financial assistance to 
women-owned businesses and to evaluate the efforts of Federal 
agencies and the private sector in assisting such businesses. 
It also required the Office to make recommendations and submit 
specified reports concerning issues and regulations affecting 
small business and any necessity for corrective action. 
Further, it required the Office to evaluate the efforts of the 
Federal government and private industry to assist small 
businesses owned by veterans and service-disabled veterans, and 
required the SBA to provide appropriate administrative support 
to the Office. Lastly, the legislation required the Chief 
Counsel to report annually to the President and specified 
congressional committees on agency compliance with Federal 
regulatory analysis requirements. The bill passed the Senate by 
unanimous consent on March 26, 2001, but was not passed by the 
House Committee on Small Business during the 107th Congress.

The White House Quadrennial Small Business Summit

    On February 27, 2001, Senators Kerry and Bond introduced 
the White House Quadrennial Small Business Summit Act, S. 396. 
It mandated that the White House hold a quadrennial national 
summit to recognize outstanding small businesses, as well as 
develop and promote ideas to further advance all American small 
businesses. The bill also established the White House 
Quadrennial Commission on Small Business to conduct the 
Quadrennial and State Summits that would bring together 
individuals concerned with issues relating to small business. 
The Commission would appoint a Summit Advisory Committee from 
participants at the previous Quadrennial Summit. It also 
directed the Chief Counsel for Advocacy of the Small Business 
Administration to assist in carrying out the Quadrennial Summit 
and prerequisite State Summits. In addition, it required each 
Summit's Commission to report to the President and the chairmen 
and ranking members of the Congressional small-business 
committees on its findings, recommendations, and proposals for 
legislative changes to implement such recommendations. S. 396 
was unanimously voted out of Committee without amendment on 
February 28, 2001. The Committee report 107-136 was filed on 
February 7, 2002, but the full Senate prior to adjournment did 
not take up the legislation.

                   The SBA Budget and Appropriations

    In the past two fiscal years, the Administration has not 
requested adequate resources to fund and staff the Small 
Business Administration and the services it provides. For FY 
2002, the President requested a cut in funding from almost $900 
million to $539 million. At a time when the economy was 
volatile and the Federal Reserve reported that 45 percent of 
banks were cutting back on lending to small businesses, the FY 
2002 budget eliminated and froze funding for loans and venture 
capital to small businesses that conventional lenders typically 
wouldn't make even in good times. The President's FY 2002 
budget request eliminated funding for the SBA's largest loan 
program, the 7(a) program, and shifted the costs to small 
business borrowers and lenders by increasing already excessive 
fees. In order to fund a loan program of $10.5 billion, small 
businesses would have had to pay at least $112 million extra in 
fees. In that budget, the President also eliminated all funding 
for the SBIC program, whose investments have more than paid for 
themselves with successes like Intel, Callaway Golf, and 
Staples. The President's FY 2002 budget requested 19 percent 
less for microloans than the previous year's appropriation, 
nearly 14 percent less for Small Business Development Centers, 
shifting the cost to entrepreneurs seeking small business 
counseling and training. The budget drastically cut funding for 
the disaster loan program and proposed moving it out of the 
Agency. Fortunately, Congress opposed that proposal, which if 
implemented, would have compounded the impact of the terrorist 
attacks of 9/11 as homeowners and small businesses in need 
would have been dealing with a program inadequately funded and 
under reorganization.
    In FY 2003, the President's request for the SBA was $798 
million, closer to the true costs of supporting small business 
programs during an economic downturn. However, in some 
respects, the budget was even worse, most notably the 50 
percent cut in 7(a) loans. In that budget request, increases 
were primarily limited to administrative expenses and staffing. 
Consequently, for the second consecutive year, the Committee 
and small business supporters in the Congress have spent much 
of their time working to restore cuts and eliminate fee 
increases for the SBA.
    On April 6, 2001 Senator Kerry and then-Chairman Bond 
offered amendment No. 183 to the Senate Budget Resolution for 
FY 2002. The full Senate agreed to it by voice vote. The 
amendment had 13 cosponsors, including Senator Snowe. The 
purpose of the amendment was to restore funding, and in certain 
program areas to increase funding, to the SBA for FY 2002. Had 
the President's budget been enacted, the SBA's programs would 
have experienced, at minimum, a 26 percent cut. Specifically, 
the amendment provided $264 million for the SBA's FY 2002 
budget. Senator Kerry, together with Senators Bond and Collins, 
offered an amendment to increase funding for the Women's 
Business Centers for FY 2002. The purpose was to increase 
funding from $12 million to $13.7 million, the fully authorized 
amount. The Kerry-Bond amendment passed the Senate, but the 
program's overall funding was cut in conference, as was the 
funding for many of the SBA's programs.

Hearing: ``SBA's Funding Priorities for FY 2002''

    On May 1, 2001, the Committee held a hearing to review the 
President's FY 2002 budget for the SBA. There were three 
panels, and nine witnesses.
    The first panel was reserved for the Administration's 
witness, Mr. John D. Whitmore, Acting Administrator of the 
Small Business Administration in Washington, D.C. Mr. Whitmore 
presented the President's FY 2002 budget proposal for the SBA.
    The witnesses on the second panel primarily addressed 
proposals affecting the SBA's credit programs. Providing 
testimony were: Mr. Alan Corbet, Executive Director of the 
Growth Opportunity Connection in Kansas City, Missouri, who 
testified about the Microloan Program and the harm to minority 
borrowers and risk of taxpayer money that would be caused by 
the budget's inadequate funding; Mr. Lee Mercer, President of 
the National Association of Small Business Investment Companies 
based in Washington, D.C., who testified in favor of the 
proposal to eliminate funding for the SBIC program in exchange 
for a higher program level and the need for additional SBA 
staff to operate the SBIC program and to faster process license 
applications; Mr. Ronald L. Phillips, President of Coastal 
Enterprises, Inc. in Wiscasset, Maine, who testified against 
the proposal to eliminate funding for the New Markets Venture 
Capital program and called for administrative and legislative 
changes to allow the program to work as Congress intended; Mr. 
Anthony R. Wilkinson, President and Chief Executive Officer of 
the National Association of Government Guaranteed Lenders, Inc. 
in Stillwater, Oklahoma, who testified against the President's 
proposal to eliminate funding for the 7(a) loan program, 
against the proposed increase in loan fees on borrowers and 
lenders, and in favor of the budget amendment by Senators Kerry 
and Bond to provide $118 million in funding, allowing for $11 
billion in loans to be leveraged.
    The witnesses on the third panel primarily addressed 
proposals affecting the SBA's non-credit programs. Providing 
testimony were: Mr. Harry Alford, President of the National 
Black Chamber of Commerce in Washington, D.C., who addressed 
government contracting deficiencies for minority-owned small 
businesses and testified in opposition to the proposal to 
eliminate funding for the BusinessLINC program; Ms. Wendy 
Werkmeister, President of the Wisconsin Women's Business 
Initiative Corporation in Milwaukee, Wisconsin, who testified 
against the proposal to freeze funding for Women's Business 
Centers, inadequately fund the Microloan Program and eliminate 
funding for the PRIME program; and Ms. Diane Wolverton, State 
Director for the Wyoming Small Business Development Center in 
Laramie,Wyoming and Chairman of the Association of Small 
Business Development Centers Board, who was a former successful 
business owner and testified about her first-hand experience 
with SBDC assistance and the Association's opposition to the 
budget request for SBDCs.
    Among Committee members, there was bi-partisan opposition 
to the President's budget, which requested a 26-percent 
reduction in funding for the SBA's credit and non-credit 
programs, including elimination of all funding for the Agency's 
largest small-business lending program, the 7(a) program, and 
shifting the cost through higher fees to small-business 
borrowers and lenders. The budget cuts jumped to 40 percent 
with the Administration's proposal for disaster funding, which 
would have created a ``National Emergency Reserve,'' leaving 
only a base amount of $300 million at the Agency. That amounted 
to $526 million less in disaster loans than Congress provided 
the previous year.

Letters Sent to Government Officials

    On March 1, 2002, Chairman Kerry sent a letter to Budget 
Chairman Kent Conrad and Ranking Minority Member Pete Domenici 
regarding his views on the President's FY 2003 budget request 
for the SBA. In that letter he opposed the budget and listed 
his primary concerns as the 50-percent reduction in the 7(a) 
loan program; the fee increases to the 504 loan program; the 
cut in microloan technical assistance; and the overall problem 
with the SBA's subsidy rate models and assumptions. In summary, 
Chairman Kerry proposed that $200 million be added to the SBA's 
FY 2003 budget to make up for the inadequate funding and budget 
cuts. The Chairman was successful in obtaining the funds 
requested for the budget, which the Budget Committee adopted.
    On April 26, 2001, Senator Kerry sent a letter to Senate 
and House Conferees on the Budget Resolution for FY 2002, 
asking them to include the funding for the SBA that the Senate 
agreed to by voting in favor of Kerry Budget Resolution 
Amendment No. 183 on April 6.
    On April 30, 2001, Senator Kerry wrote to the Chairman and 
Ranking Member of the Appropriations Subcommittee on Commerce, 
Justice and State (CJS) Departments to request adequate funding 
for the SBA Microloan Program, which the Senate endorsed in the 
Budget Resolution Amendment 183 on April 6.
    On April 30, 2001, Senator Kerry sent letters to Senate 
Appropriations CJS Subcommittee Chairman Gregg and Ranking 
Member Hollings to request funding for the SBA as the Senate 
agreed to in the Kerry-Bond Budget Resolution Amendment No. 183 
on April 6.
    On October 2, 2001, in an attempt to keep the SBIC program 
from shutting down and to avoid a larger increase in program 
fees to compensate for the lack of funding, Senator Kerry and 
Senator Bond sent a letter to the Senate Appropriations CJS 
Subcommittee requesting level funding, consistent with Budget 
Amendment 183 that restored that money. Ultimately, the 
Administration succeeded in eliminating all the funding for the 
program and raising the fees.

Hearing: ``The SBA Fiscal Year 2003 Budget and Other Matters''

    At the Committee's February 27th, 2002 hearing on the SBA's 
FY 2003 budget request, Administrator Barreto testified, as did 
five members of the small business community, which included 
representatives from the National Association of Government 
Guaranteed Lenders for 7(a) loans, the National Association of 
Development Companies for 504 loans, the Growth Opportunity 
Connection for microloans and microloan technical assistance, 
Women Entrepreneurs of Baltimore for Women's Business Centers 
and PRIME, and the Association of Small Business Development 
Centers. Democrats and Republicans were united against the 
President's proposal to cut 7(a) loans by 50 percent, and a 
number of Senators from both sides of the aisle spoke against 
the broken subsidy rates, fee increases on 504 loans, under 
funding for microloans, women's business centers and prime and 
SBDCs. Senator Bennett of Utah was particularly supportive of 
increasing the 7(a) funding and defending the fee reduction, 
which he characterized as a ``tax cut.'' Senator Kerry asked 
Administrator Barreto to have the Administration send up an 
amendment to adequately fund the 7(a) loan program, but he 
would not agree to request such an amendment.
    Consequently, the Committee and a coalition of more than 30 
small business organizations, led by the U.S. Chamber of 
Commerce, spent most of the year trying to reverse the 
Administration's cuts. All efforts were blocked. The Committee 
will continue advocating for funding and a better subsidy rate 
model in the 108th Congress.

              Federal Loan Programs and Access to Capital

    Access to capital remains a top priority for American small 
businesses. The Federal government's programs of guaranteed 
loans and venture capital have helped millions of small 
businesses finance the startup, growth, and expansion of their 
firms, and the Committee spent much of the 107th Congress 
focusing on this critical small-business need. The Committee 
sought to overcome the Administration's insufficient budget 
requests and secure adequate funding for the SBA's finance 
programs. The Committee also worked with the General Accounting 
Office to identify ways that the SBA and the OMB could correct 
the government accounting systems in the current fiscal year 
that have had an adverse effect on small businesses.

The Microloan Program

    On January 24, 2001, Senator Kerry introduced S. 174, the 
Microloan Program Improvement Act of 2001. The legislation was 
designed to make the SBA Microloan Program more flexible to 
meet credit needs, more accessible to micro-entrepreneurs 
across the nation, and more streamlined for lenders to make 
loans and provide management assistance. It built on changes 
that were enacted in the 106th Congress as part of the 2001 
Omnibus Consolidated Appropriations Act. S. 174 included the 
following changes: (1) allowed micro-intermediaries to offer 
revolving lines of credit; (2) broadened the eligibility 
criteria for potential SBA micro-intermediaries; (3) expanded 
flexibility for intermediaries to subcontract for technical 
assistance and permitted more pre-loan technical assistance; 
and, (4) established a peer-to-peer mentoring program, which 
Senator Snowe introduced on January 25, 2001, as a separate 
initiative, S. 182. Senator Kerry was the lead cosponsor of S. 
182. The Administration opposed the peer-to-peer mentoring 
provision and persuaded the House Committee on Small Business 
to strike it when it considered the legislation.
    The Senate Committee on Small Business and Entrepreneurship 
marked up and passed S. 174 unanimously on February 28, 2001. 
The report was filed in June 2001, but it was blocked from 
passage by Republican objections until November 16. The 
legislation was then sent to the House and referred to the 
House Committee on Small Business where on April 17, 2002, it 
was marked up, passed and ordered reported out of Committee. 
The bill died in the 107th Congress because the full House 
failed to bring it up for a vote.

The Small Business Investment Company Program

    On July 18, 2001, Ranking Member Bond and Chairman Kerry 
introduced S. 1196, the Small Business Investment Company 
(SBIC) Amendments Act of 2001. The purpose of this bill, as 
amended by a managers' amendment for final passage, was to 
adjust the fees charged to Participating Security SBICs from 
one percent to 1.37 percent. The change was necessary because 
the demand for the SBIC program had been growing beyond what 
was possible to support through annual appropriations. The 
legislation allowed the fees to be increased enough to cover 
all the currently established subsidy costs of a $3.5 billion 
program, assuming no appropriations, as was the case for FY 
2002 at the President's request. If in a future fiscal year 
some appropriations were made available, the legislation made 
it possible for the fee to be adjusted so that it would exactly 
cover the subsidy costs of the program.
    On July 19, 2001, the Committee marked up and passed S. 
1196 by unanimous consent. The bill passed the full Senate with 
a Kerry-Bond amendment, which lowered the borrowers' and 
lenders' costs of participating in the 7(a) and 504 programs as 
of fiscal year 2003. This amendment was included at the request 
of the small business community to offset the fee increases 
requested by the Administration in another small business 
finance program and to bring the 7(a) and 504 fees more in line 
with the costs of the programs. The 7(a) and 504 borrowers and 
lenders had been overcharged approximately $2 billion combined 
because the Administration continued to use faulty subsidy rate 
calculations. The bill was signed into law on December 21, 
2001, becoming PL 107-100.

Letters Regarding the 7(a) Loan Program's Subsidy Rate Model

    On April 12, 2002, Chairman Kerry and Ranking Member Bond 
joined Senate Budget Committee Chairman Kent Conrad and Ranking 
Member Pete Domenici, in sending a letter to Mitchell Daniels, 
Director of the Office of Management and Budget, regarding 
continued and routine over-estimation by the OMB of the cost of 
the SBA's 7(a) and 504 loan programs. That persistent over-
estimation caused small business borrowers and lenders in the 
504 program to pay nearly $400 million in excess fees and in 
the 7(a) loan program of roughly $1 billion in excess fees. Of 
particular concern was the impact of the subsidy rate model on 
the FY 2003 budget, which cut the 7(a) loan program by 50 
percent, reducing from $11 billion to less that $5 billion the 
amount of loan dollars available to small businesses. The 
Senators (1) requested that the Administration submit and 
support a budget amendment for FY 2003 to make possible $11 
billion in program level, (2) offered the Administration an 
opportunity to correct any assumptions in the FY 2003 budget 
that would more accurately reflect the performance cost of the 
program, and (3) asked for any legislative recommendations that 
could fix the problem. In its response of May 17, 2002, the OMB 
ignored all three of the Senators' requests. As a result, the 
Committees pursued a legislative solution. Based on a study 
from the GAO the legislation that would mandate the SBA and the 
OMB to use only data of actual loan performance from 1992 
forward in calculating the subsidy rate.
    The above-mentioned study resulted from a May 4, 2002, 
request to the GAO from the leaders of the Senate and House 
Committees on Small Business, Senators Kerry and Bond, and 
Congressmen Manzullo and Velazquez, that sought review of the 
OMB's subsidy rate model for the 7(a) loan program, which had 
resulted in borrowers and lenders annually paying excessive 
fees to participate in this program. For almost every year 
since theinception of credit reform in 1992, a comparison of 
projected program costs against actual program costs for FY 2002 in the 
7(a) program revealed that substantial funds were being returned to the 
Treasury routinely because the subsidy rates were too high. 
Consequently, lenders and borrowers paid more in fees than necessary 
year after year. Congress asked the GAO to identify problems with the 
cost projections and to recommend solutions that would more accurately 
calculate program costs and therefore bring fees more reasonably in 
line with the actual costs of the program. The GAO found, among other 
things, that the SBA and the OMB had miscalculated the estimated 
default rate of 7(a) loans by 87 percent and, that as of FY 2000, 
borrowers and lenders has paid roughly $1 billion more than necessary 
in fees since 1992. The GAO made five recommendations to address the 
errors, but the Administration rejected all of them.

Roundtable: ``The 7(a) Loan Guaranty Program: A Look at SBA's Flagship 
        Program's Fees and Subsidy Rate''

    On September 5, 2001, Chairman Kerry convened a Roundtable, 
``The 7(a) Loan Guaranty Program: A Look at SBA's Flagship 
Program's Fees and Subsidy Rate,'' with small business lenders, 
small business trade associations, the SBA and the OMB. The 
purpose was to discuss the impact of excessive program fees on 
the ability of small businesses to access and lenders to 
participate in the 7(a) Loan Guaranty Program; to hear the 
findings of the General Accounting Office study on the subsidy 
rate model for the 7(a) Loan Guaranty Program; to expose the 
drastic difference between projected and actual default rates 
used to calculate the subsidy rates for the SBA's 7(a) Loan 
Guaranty Program; to discuss the various proposals to change 
the subsidy rate model for the 7(a) Loan Guaranty Program; and 
to discuss the various proposals to change the program fees.
    The Committee needed to convene a Roundtable because the 
7(a) trade association, the National Association of Government 
Guaranteed Lenders (NAGGL), had asserted for years that the 
model used to calculate the subsidy rate (the cost for running 
the program) for the 7(a) Loan Guaranty Program was flawed and 
needed to be exposed to see exactly what the Office of 
Management and Budget and the Small Business Administration use 
to calculate the subsidy rate. NAGGL pointed to the OMB and the 
SBA's usage of inaccurate estimates of defaults, such as 14 
percent for estimated defaults versus 8 to 9 percent for actual 
defaults. The inaccuracies caused small business borrowers and 
participating lenders to pay too much to participate in the 
program.
    The concern of the small-business community regarding 
overcharging for program participation was exacerbated by the 
Administration's proposal in the FY 2002 budget request to 
eliminate funding for the 7(a) loan program and raise fees that 
were already too high. In the Roundtable, NAGGL urged Congress 
to require the OMB and the SBA to use more accurate data in the 
subsidy rate models in order to derive a more accurate cost of 
the program, and therefore more accurate fees charged to 
borrowers and lenders. The Association also urged Congress to 
lower the program fees because they were unfair and driving 
lenders out of the program, thereby reducing access to 
affordable credit for small businesses.
    Participants included: Mr. James C. Ballentine, Director of 
Community Development for the American Bankers Association, 
Washington, D.C.; Mr. David Bartram, President, SBA Division, 
U.S. Bank, San Diego, CA; Mr. Daniel Blair, Assistant Director, 
Financial Management and Assurance, General Accounting Office, 
Washington, D.C.; Dr. Lloyd Blanchard, Associate Director, 
General Government Programs, Office of Management and Budget, 
Washington, D.C.; Mr. John Brocato, President & CEO, Biz 
Capital, New Orleans, LA; Ms. Linda Calbom, Director, Financial 
Management and Assurance, General Accounting Office, 
Washington, D.C.; Mr. Todd McCracken, President, National Small 
Business United, Washington, D.C.; Mr. Keith McLaughlin, Senior 
Vice President, Union Planters Bank, Columbia, MO; Mr. Paul G. 
Merski, Chief Economist & Director of Federal Tax Policy, 
Independent Community Bankers of America, Washington, D.C.; Mr. 
Bruce D. Phillips, Senior Fellow in Regulatory Studies, 
National Federation of Independent Business Education 
Foundation, Washington, D.C.; Mr. Stephen Raffaele, Senior VP & 
Treasurer, Sterling Bancshares, Inc., Houston, TX; Mr. Deryl K. 
Schuster, President, Mid-America Division, Wichita, KS; Mr. 
Steven Stultz, Stultz Financial, Newport Beach, CA; Mr. 
Wilkinson, President, NAGGL, Stillwater, OK; Mr. Dick Wise, 
President & CEO, American National Bank, Parma, OH; and Mr. 
John D. Whitmore, Chief of Staff, Small Business 
Administration, Washington, D.C.

                               Appendixes


Hearings of the 107th Congress

            First Session
    March 1, 2001: Forum titled ``Encouraging and Expanding 
Entrepreneurship: Examining the Federal Role'', Senator Bond 
chaired.
    March 7, 2001: Roundtable titled ``PNTR/WTO: A Good Deal 
for U.S. Small Businesses in China?'' Senator Bond chaired.
    April 4, 2001: Joint Roundtable with the House Small 
Business Committee titled ``A Tax Agenda for Small Business'', 
Senator Bond chaired.
    April 24, 2001: Hearing titled ``Protecting Small Business 
Rights: SBREFA on Its 5th Anniversary'', Senator Bond chaired.
    May 1, 2001: Hearing titled ``SBA's Funding Priorities for 
FY 2002'', Senator Bond chaired.
    June 21, 2001: Hearing titled ``S. 856, Small Business 
Technology Transfer Reauthorization'', Senator Kerry chaired.
    June 23, 2001: Field Hearing titled ``The Energy Crisis: 
Taking the Power Out of Small Business'' held in Seattle, 
Washington, Senator Kerry chaired.
    July 19, 2001: Confirmation Hearing on the Nomination of 
Hector V. Barreto and Markup on Pending Legislation, Senator 
Kerry chaired.
    August 1, 2001: Hearing titled ``The Business of 
Environmental Technology'', Senator Kerry chaired.
    August 16, 2001:Field Hearing titled ``Revitalizing Rural 
America: What Can the Federal Government Do to Promote Small 
Business Growth and Development in Rural Communities?'' held in 
St. Cloud, Minnesota, Senator Wellstone chaired.
    September 5, 2001: Roundtable titled ``The 7(a) Loan 
Guaranty Program: A Look at the SBA's Flagship Program's Fees 
and Subsidy Rate'', Senator Kerry chaired.
    September 10, 2001: Field Hearing titled ``Entrepreneurial 
Companies: Their Needs and Challenges in Today's Economy'' held 
in Cambridge, Massachusetts, Senator Kerry chaired.
    October 16, 2001: Confirmation Hearing on the Nomination of 
Thomas M. Sullivan to Chief Counsel for Advocacy at the Small 
Business Administration, Senator Kerry chaired.
            Second Session
    February 27, 2002: Hearing titled ``The SBA Fiscal Year 
2003 Budget and Nomination Hearing of Melanie Sabelhaus to be 
Deputy Administrator of the Small Business Administration'', 
Senator Kerry chaired.
    April 30, 2002: Joint Hearing with the Senate Indian 
Affairs Committee titled ``Small Business Development in Native 
American Communities: Is the Federal Government Meeting its 
Obligations?'' Senator Kerry chaired.
    May 22, 2002: Roundtable titled ``Unleashing the Power of 
Entrepreneurship: Stimulating Investment in America's Small 
Businesses'', Senator Kerry chaired.
    June 19, 2002: Roundtable titled ``Are Government 
Purchasing Policies Failing Small Business?'' Senator Kerry 
chaired.
    July 24, 2002: Markup of Procurement, Educational, Drought 
Relief and other Small Business Legislation, Senator Kerry 
chaired.
    August 1, 2002: Roundtable titled ``Promoting Small 
Business Regulatory Compliance and Entrepreneurial Education--
the Role of SBDC Network'', Senator Kerry chaired.

Bills Referred to the Committee

            First Session
    S. 174 (Mr. Kerry) January 24, 2001. A bill to amend the 
Small Business Act with respect to the Microloan Program, and 
for other purposes.
    S. 182 (Ms. Snowe) January 25, 2001. A bill to amend the 
Small Business Act with respect to the Microloan Program.
    S. 295 (Mr. Kerry) February 8, 2001. A bill to provide 
emergency relief to small businesses affected by significant 
increases in the prices of heating oil, natural gas, propane, 
and kerosene, and for other purposes.
    S. 348 (Mr. Hutchinson) February 15, 2001. A bill to amend 
the Small Business Act to extend the authorization for the 
drug-free workplace program.
    S. 395 (Mr. Bond) February 27, 2001. A bill to ensure the 
independence and nonpartisan operation of the Office of 
Advocacy of the Small Business Administration.
    S. 396 (Mr. Bond) February 27, 2001. A bill to provide for 
national quadrennial summits on small business and State 
summits on small business, to establish the White House 
Quadrennial Commission on Small Business, and for other 
purposes.
    S. 408 (Ms. Boxer) February 27, 2001. A bill to provide 
emergency relief to small businesses affected by significant 
increases in the price of electricity.
    S. 522 (Mr. Kerry) March 13, 2001. A bill to direct the 
Administrator of the Small Business Administration to conduct a 
pilot program to raise awareness about telecommuting among 
small business employers, and to encourage such employers to 
offer telecommuting options to employees.
    S. 849 (Mr. Bond) May 9, 2001. A bill to amend provisions 
of law enacted by the Small Business Regulatory Enforcement 
Fairness Act of 1996 (104-121) to ensure full analysis of 
potential impacts on small entities of rules proposed by 
certain agencies, and for other purposes.
    S. 856 (Mr. Kerry) May 9, 2001. A bill to reauthorize the 
Small Business Technology Transfer Program, and for other 
purposes.
    S. 861 (Mr. Bond) May 10, 2001. A bill to enhance small 
business access to Federal contracting opportunities and 
provide technical advice and support that small businesses need 
to perform contracts awarded to them, and for other purposes.
    S. 1196 (Mr. Bond) July 18, 2001. A bill to amend the Small 
Business Investment Act of 1958, and for other purposes. Signed 
by the President and became Public Law 107-100 on December 21, 
2001.
    S. 1323 (Mr. Kerry) August 2, 2001. A bill entitled SBIR 
and STTR Foreign Patent Protection Act of 2001.
    S. 1472 (Mr. Kerry) September 26, 2001. A bill to amend the 
Small Business Act to promote the involvement of small business 
concerns and small business joint ventures in certain types of 
procurement contracts, to establish the Small Business 
Procurement Competition Program, and for other purposes.
    S. 1499 (Mr. Kerry) October 4, 2001. A bill to provide 
assistance to small business concerns adversely impacted by the 
terrorist attacks perpetrated against the United States on 9/
11, 2001, and for other purposes.
    S. 1552 (Mr. Harkin) October 16, 2001. A bill to provide 
for grants through the Small business Administration for losses 
suffered by general aviation small business concerns as a 
result of the terrorist attacks of 9/11, 2001.
    S. 1670 (Mr. Kerry) November 9, 2001. A bill to amend the 
Small Business Investment Act of 1958 with respect to subsidy 
fees.
    S. 1676 (Mr. Kerry) November 13, 2001. A bill to amend the 
Internal Revenue Code of 1986 to provide tax relief for small 
business, and for other purposes.
    H.R. 203 (Mr. Sweeney) January 3, 2001. A bill to amend the 
Small Business Act to direct the Administrator of the Small 
Business Administration to establish a pilot program to provide 
regulatory compliance assistance to small business concerns, 
and for other purposes.
    H.R. 2538 (Mr. Udall of New Mexico) July 17, 2001. A bill 
to amend the Small Business Act to expand and improve the 
assistance provided by Small Business Development Centers to 
Indian tribe members, Alaska Natives, and Native Hawaiians.
    H.R. 2666 (Mr. Brady of Pennsylvania) July 27, 2001. A bill 
to amend the Small Business Act to direct the Administrator of 
the Small Business Administration to establish a vocational and 
technical entrepreneurship development program.
            Second Session
    S. 1903 (Mr. Kerry) January 28, 2002. A bill to amend the 
Internal Revenue Code of 1986 to allow certain small businesses 
to defer payment of tax.
    S. 1994 (Mr. Kerry) March 6, 2002. A bill to establish a 
priority preference among certain small business concerns for 
purposes of Federal contracts, and for other purposes.
    S. 2335 (Mr. Johnson) April 25, 2002. A bill to establish 
the Office of Native American Affairs within the Small Business 
Administration, to create the Native American Small Business 
Development Program, and for other purposes.
    S. 2455 (Mr. Ensign) May 2, 2002. A bill to amend the Small 
Business Act to direct the Administrator of the Small Business 
Administration to establish a pilot program to provide 
regulatory compliance assistance to small business concerns, 
and for other purposes.
    S. 2466 (Mr. Kerry) May 7, 2002. A bill to modify the 
contract consolidation requirements in the Small Business Act, 
and for other purposes.
    S. 2483 (Mr. Cleland) May 8, 2002. A bill to amend the 
Small Business Act to direct the Administrator of the Small 
Business Administration to establish a pilot program to provide 
regulatory compliance assistance to small business concerns, 
and for other purposes.
    S. 2734 (Mr. Kerry) July 16, 2002. A bill to provide 
emergency assistance to non-farm small business concerns that 
have suffered economic harm from the devastating effects of 
drought.
    S. 2753 (Mr. Kerry) July 18, 2002. A bill to provide for a 
Small and Disadvantaged Business Ombudsman for Procurement in 
the Small Business Administration, and for other purposes.
    S. 2891 (Mr. Kerry) August 1, 2002. A bill to create a 4-
year pilot program that makes small, non-profit child care 
businesses eligible for SBA 504 loans.

Public Laws

                   Public Law 107-50, 107th Congress


 An Act To reauthorize the Small Business Technology Transfer Program, 
                         and for other purposes

    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 Technology 
Transfer Program Reauthorization Act of 2001''.

SEC. 2. EXTENSION OF PROGRAM AND EXPENDITURE AMOUNTS.

    (a) In General.--Section 9(n)(1) of the Small Business Act 
(15 U.S.C. 638(n)(1)) is amended to read as follows:
          ``(1) Required expenditure amounts.--
                  ``(A) In general.--With respect to each 
                fiscal year through fiscal year 2009, each 
                Federal agency that has an extramural budget 
                for research, or research and development, in 
                excess of $1,000,000,000 for that fiscal year, 
                shall expend with small business concerns not 
                less than the percentage of that extramural 
                budget specified in subparagraph (B), 
                specifically in connection with STTR programs 
                that meet the requirements of this section and 
                any policy directives and regulations issued 
                under this section.
                  ``(B) Expenditure amounts.--The percentage of 
                the extramural budget required to be expended 
                by an agency in accordance with subparagraph 
                (A) shall be--
                          ``(i) 0.15 percent for each fiscal 
                        year through fiscal year 2003; and
                          ``(ii) 0.3 percent for fiscal year 
                        2004 and each fiscal year 
                        thereafter.''.
    (b) Conforming amendment.--Section 9 of the Small Business 
Act (15 U.S.C. 638) is amended in subsections (b)(4) and 
(e)(6), by striking ``pilot'' each place it appears.

SEC. 3. INCREASE IN AUTHORIZED PHASE II AWARDS.

    (a) In General.--Section 9(p)(2)(B)(ix) of the small 
Business Act (15 U.S.C. 638(p)(2)(B)(ix)) is amended--
          (1) by striking ``$500,000'' and inserting 
        ``$750,000''; and
          (2) by inserting before the semicolon at the end the 
        following: ``, and shorter or longer periods of time to 
        be approved at the discretion of the awarding agency 
        where appropriate for a particular project''.
    (b) Effective Date.--The amendments made by subsection (a) 
shall be effective beginning in fiscal year 2004.

SEC. 4. AGENCY OUTREACH.

    Section 9(o) of the Small Business Act (15 U.S.C. 638(o)) 
is amended--
          (1) in paragraph (12), by striking ``and'' at the 
        end;
          (2) in paragraph (13), by striking the period at the 
        end and inserting a semicolon; and
          (3) by adding at the end the following:
          ``(14) implement an outreach program to research 
        institutions and small business concerns for the 
        purpose of enhancing its STTR program, in conjunction 
        with any such outreach done for purposes of the SBIR 
        program; and''.

SEC. 5. POLICY DIRECTIVE MODIFICATIONS.

    Section 9(p) of the Small Business Act (15 U.S.C. 638(p)) 
is amended by adding at the end the following:
          ``(3) Modifications.--Not later than 120 days after 
        the date of enactment of this paragraph, the 
        Administrator shall modify the policy directive issued 
        pursuant to this subsection to clarify that the rights 
        provided for under paragraph (2)(B)(v) apply to all 
        Federal funding awards under this section, including 
        the first phase (as described in subsection (e)(6)(A)), 
        the second phase (as described in subsection 
        (e)(6)(B)), and the third phase (as described in 
        subsection (e)(6)(C)).''.

SEC. 6. STTR PROGRAM DATA COLLECTION.

    (a) In General.--Section 9(o) of the Small Business Act (15 
U.S.C. 638(o)), as amended by this Act, is amended by adding at 
the end the following:
          ``(15) collect, and maintain in a common format in 
        accordance with subsection (v), such information from 
        awardees as is necessary to assess the STTR program, 
        including information necessary to maintain the 
        database described in subsection (k).''.
    (b) Database.--Section 9(k) of the Small Business Act (15 
U.S.C. 638(k) is amended--
          (1) in paragraph (1)--
                  (A) by inserting ``or STTR'' after ``SBIR'' 
                each place it appears;
                  (B) in subparagraph (C), by striking ``and'' 
                at the end;
                  (C) in subparagraph (D), by striking the 
                period at the end and inserting ``, and''; and
                  (D) by adding at the end the following:
                  ``(E) with respect to assistance under the 
                STTR program only--
                          ``(i) whether the small business 
                        concern or the research institution 
                        initiated their collaboration on each 
                        assisted STTR project;
                          ``(ii) whether the small business 
                        concern or the research institution 
                        originated any technology relating to 
                        the assisted STTR project;
                          ``(iii) the length of time it took to 
                        negotiate any licensing agreement 
                        between the small business concern and 
                        the research institution under each 
                        assisted STTR project; and
                          ``(iv) how the proceeds from 
                        commercialization, marketing, or sale 
                        of technology resulting from each 
                        assisted STTR project were allocated 
                        (by percentage)between the small 
business concern and the research institution.''; and
          (2) in paragraph (2)--
                  (A) by inserting ``or an STTR program 
                pursuant to subsection (n)(1)'' after 
                ``(f)(1)'';
                  (B) by striking ``solely for SBIR'' and 
                inserting ``exclusively for SBIR and STTR'';
                  (C) in subparagraph (A)(iii), by inserting 
                ``and STTR'' after ``SBIR''; and
                  (D) in subparagraph (D), by inserting ``or 
                STTR'' after ``SBIR''.
    (c) Simplified Reporting Requirements.--Section 9(v) of the 
Small Business Act (15 U.S.C. 638(v)) is amended by inserting 
``or STTR'' after ``SBIR'' each place it appears.
    (d) Reports to Congress.--Section 9(b)(7) of the Small 
Business Act (15 U.S.C. 638(b)(7)) is amended by striking ``and 
(o)(9),'' and inserting ``, (o)(9), and (o)(15), the number of 
proposals received from, and the number and total amount of 
awards to, HUBZone small business concerns under each of the 
SBIR and STTR programs,''.

SEC. 7. STTR PROGRAM-WIDE MODEL AGREEMENT FOR INTELLECTUAL PROPERTY 
                    RIGHTS.

    (a) Development of Model Agreement.--Section 9 of the Small 
Business Act (15 U.S.C. 638) is amended by adding at the end of 
the following:
    ``(w) STTR Model Agreement for Intellectual Property 
Rights.--
          ``(1) In general.--The Administrator shall promulgate 
        regulations establishing a single model agreement for 
        use in the STTR program that allocates between small 
        business concerns and research institutions 
        intellectual property rights and rights, if any, to 
        carry out follow-on research, development, or 
        commercialization.
          ``(2) Opportunity for comment.--In promulgating 
        regulations under paragraph (1), the Administrator 
        shall provide to affected agencies, small business 
        concerns, research institutions, and other interested 
        parties the opportunity to submit written comments.''.
    (b) Adoption of Model Agreement By Federal Agencies.--
Section 9(o)(11) of the Small Business Act (15 U.S.C. 
638(o)(11)) is amended by striking ``develop a model agreement 
not later than July 31, 1993, to be approved by the 
Administration,'' and inserting ``adopt the agreement developed 
by the Administrator under sub-section (w) as the agency's 
model agreement''.

SEC. 8 FAST PROGRAM ASSISTANCE TO WOMEN-OWNED AND MINORITY-OWNED SMALL 
                    BUSINESS CONCERNS AND CONCERNS LOCATED IN AREAS NOT 
                    PARTICIPATING IN SBIR AND STTR.

    (a) Selection Consideration.--Section 34(c)(2)(B) of the 
Small Business Act (15 U.S.C. 657d(c)(2)(B)) is amended--
          (1) in clause (iv), by striking ``and'' at the end;
          (2) in clause (v), by striking the period at the end 
        and inserting ``; and''; and
          (3) by adding at the end the following new clause:
                  ``(vi) whether the proposal addresses the 
                needs of small business concerns--
                          ``(I) owned and controlled by women;
                          ``(II) owned and controlled by 
                        minorities; and
                          ``(III) located in areas that have 
                        historically not participated in the 
                        SBIR and STTR programs.''.
    (b) Regulations.--Section 34(c)(4) of the Small Business 
Act (15 U.S.C. 657d(c)(4)) is amended by adding at the end of 
following: ``The Administrator shall promulgate regulations 
establishing standards for the consideration of proposals under 
paragraph (2), including standards regarding each of the 
considerations identified in paragraph (2)(B).''.

Approved October 15, 2001.
                              ----------                              


                   Public Law 107-100 107th Congress


  AN ACT To amend the Small Business Investment Act of 1958, and for 
                             other purposes

    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 Investment 
Company Amendments Act of 2001''.

SEC. 2. SUBSIDY FEES.

    (a) In General.--Section 303 of the Small Business 
Investment Act of 1958 (15 U.S.C. 683) is amended--
          (1) in subsection (b)--
                  (A) by striking ``of not more than 1 percent 
                per year'';
                  (B) by inserting ``which amount may not 
                exceed 1.38 percent per year, and'' before 
                ``which shall be paid''; and
                  (C) by striking ``September 30, 2000'' and 
                inserting ``September 30, 2001''; and
          (2) in subsection (g)(2)--
                  (A) by striking ``of not more than 1 percent 
                per year'';
                  (B) by inserting ``which amount may not 
                exceed 1.38 percent per year, and'' before 
                ``which shall be paid''; and
                  (C) by striking ``September 30, 2000'' and 
                inserting ``September 30, 2001''.
    (b) Effective Date.--The amendments made by this section 
shall become effective on October 1, 2001.

SEC. 3. CONFLICTS OF INTEREST.

    Section 312 of the Small Business Investment Act of 1958 
(15 U.S.C. 687d) is amended by striking ``(including disclosure 
in the locality most directly affected by the transaction)''.

SEC. 4. PENALTIES FOR FALSE STATEMENTS.

    (a) Criminal Penalties.--Section 1014 of title 18, United 
States Code, is amended by inserting ``, as defined in section 
103 of the Small Business Investment Act of 1958 (15 U.S.C. 
662), or the Small Business Administration in connection with 
any provision of the Act'' after ``small business investment 
company''.
    (b) Civil Penalties.--Section 951 of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 
U.S.C. 1833a) is amended--
          (1) by redesignating subsections (d) through (g) as 
        subsections (e) through (h), respectively; and
          (2) in subsection (c)--
                  (A) in paragraph (1), by striking ``or'' at 
                the end;
                  (B) in paragraph (2)--
                          (i) by striking ``1341;'' and 
                        inserting ``1341''; and
                          (ii) by striking ``institution.'' and 
                        inserting ``institution; or'';
                  (C) by inserting immediately after paragraph 
                (2) the following:
          ``(3) section 16(a) of the Small Business Act (15 
        U.S.C. 645(a)).''; and
                  (D) by striking ``This section shall'' and 
                inserting the following:
    ``(d) Effective Date.--This section shall''.

SEC. 5. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.

    Section 313 of the Small Business Investment Act of 1958 
(15 U.S.C. 687e) is amended to read as follows:

``SEC. 313. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.

    ``(a) Definition of `Management Official'.--In this 
section, the term `management official' means an officer, 
director, general partner, manager, employee, agent, or other 
participant in the management or conduct of the affairs of a 
licensee.
    ``(b) Removal of Management Officials.--
          ``(1) Notice of removal.--The Administrator may serve 
        upon any management official a written notice of its 
        intention to remove that management official whenever, 
        in the opinion of the Administrator--
                  ``(A) such management official--
                          ``(i) has willfully and knowingly 
                        committed any substantial violation 
                        of--
                                  ``(I) this Act;
                                  ``(II) any regulation issued 
                                under this Act; or
                                  ``(III) a cease-and-desist 
                                order which has become final; 
                                or
                          ``(ii) has willfully and knowingly 
                        committed or engaged in any act, 
                        omission, or practice which constitutes 
                        a substantial breach of a fiduciary 
                        duty of that person as a management 
                        official; and
      ``(B) the violation or breach of fiduciary duty is one 
involving personal dishonesty on the part of such management 
official.
          ``(2) Contents of notice.--A notice of intention to 
        remove a management official, as provided in paragraph 
        (1), shall contain a statement of the facts 
        constituting grounds therefore, and shall fix a time 
        and place at which a hearing will be held thereon.
          ``(3) Hearings.--
                  ``(A) Timing.--A hearing described in 
                paragraph (2) shall be fixed for a date not 
                earlier than 30 days nor later than 60 days 
                after the date of service of notice of the 
                hearing, unless an earlier or a later date is 
                set by the Administrator at the request of--
                          ``(i) the management official, and 
                        for good cause shown; or
                          ``(ii) the Attorney General of the 
                        United States.
                  ``(B) Consent.--Unless the management 
                official shall appear at a hearing described in 
                this paragraph in person or by a duly 
                authorized representative, that 
managementofficial shall be deemed to have consented to the issuance of 
an order of removal under paragraph (1).
          ``(4) Issuance of order of removal.--
                  ``(A) In general.--In the event of consent 
                under paragraph (3)(B), or if upon the record 
                made at a hearing described in this subsection, 
                the Administrator finds that any of the grounds 
                specified in the notice of removal has been 
                established, the Administrator may issue such 
                orders of removal from office as the 
                Administrator deems appropriate.
                  ``(B) Effectiveness.--An order under 
                subparagraph (A) shall--
                          ``(i) become effective at the 
                        expiration of 30 days after the date of 
                        service upon the subject licensee and 
                        the management official concerned 
                        (except in the case of an order issued 
                        upon consent as described in paragraph 
                        (3)(B), which shall become effective at 
                        the time specified in such order); and
                          ``(ii) remain effective and 
                        enforceable, except to such extent as 
                        it is stayed, modified, terminated, or 
                        set aside by action of the 
                        Administrator or a reviewing court in 
                        accordance with this section.
    ``(c) Authority to Suspend or Prohibit Participation.--
          ``(1) In general.--The Administrator may, if the 
        Administrator deems it necessary for the protection of 
        the licensee or the interests of the Administration, 
        suspend from office or prohibit from further 
        participation in any manner in the management or 
        conduct of the affairs of the licensee, or both, any 
        management official referred to in subsection (b)(1), 
        by written notice to such effect served upon the 
        management official.
          ``(2) Effectiveness.--A suspension or prohibition 
        under paragraph (1)--
                  ``(A) shall become effective upon service of 
                notice under paragraph (1); and
                  ``(B) unless stayed by a court in proceedings 
                authorized by paragraph (3), shall remain in 
                effect--
                          ``(i) pending the completion of the 
                        administrative proceedings pursuant to 
                        a notice of intention to remove served 
                        under subsection (b); and
                          ``(ii) until such time as the 
                        Administrator shall dismiss the charges 
                        specified in the notice, or, if an 
                        order of removal or prohibition is 
                        issued against the management official, 
                        until the effective date of any such 
                        order.
          ``(3) Judicial review.--Not later than 10 days after 
        any management official has been suspended from office 
        or prohibited from participation in the management or 
        conduct of the affairs of a licensee, or both, under 
        paragraph (1), that management official may apply to 
        the United States district court for the judicial 
        district in which the home office of the licensee is 
        located, or the United States District Court for the 
        District of Columbia, for a stay of the suspension or 
        prohibition pending the completion of the 
        administrative proceedings pursuant to a notice of 
        intent to remove served upon the management official 
        under subsection (b), and such court shall have 
        jurisdiction to stay such action.
    ``(d) Authority To Suspend on Criminal Charges.--
          ``(1) In general.--Whenever a management official is 
        charged in any information, indictment, or complaint 
        authorized by a United States attorney, with the 
        commission of or participation in a felony involving 
        dishonesty or breach of trust, the Administrator may, 
        by written notice served upon that management official, 
        suspend that management official from office or 
        prohibit that management official from further 
        participation in any manner in the management or 
        conduct of the affairs of the licensee, or both.
          ``(2) Effectiveness.--A suspension or prohibition 
        under paragraph (1) shall remain in effect until the 
        subject information, indictment, or complaint is 
        finally disposed of, or until terminated by the 
        Administrator.
          ``(3) Authority upon conviction.--If a judgment of 
        conviction with respect to an offense described in 
        paragraph (1) is entered against a management official, 
        then at such time as the judgment is not subject to 
        further appellate review, the Administrator may issue 
        and serve upon the management official an order 
        removing that management official, which removal shall 
        become effective upon service of a copy of the order 
        upon the licensee.
          ``(4) Authority upon dismissal or other 
        disposition.--A finding of not guilty or other 
        disposition of charges described in paragraph (1) shall 
        not preclude the Administrator from thereafter 
        instituting proceedings to suspend or remove the 
        management official from office, or to prohibit the 
        management official from participation in the 
        management or conduct of the affairs of the licensee, 
        or both, pursuant to subsection (b) or (c).
    ``(e) Notification to Licensees.--Copies of each notice 
required to be served on a management official under this 
section shall also be served upon the interested licensee.
    ``(f) Procedural Provisions; Judicial Review.--
          ``(1) Hearing venue.--Any hearing provided for in 
        this section shall be--
                  ``(A) held in the Federal judicial district 
                or in the territory in which the principal 
                office of the licensee is located, unless the 
                party afforded the hearing consents to another 
                place; and
                  ``(B) conducted in accordance with the 
                provisions of chapter 5 of title 5, United 
                States Code.
          ``(2) Issuance of orders.--After a hearing provided 
        for in this section, and not later than 90 days after 
        the Administrator has notified the parties that the 
        case has been submitted for final decision, the 
        Administrator shall render a decision in the matter 
        (which shall include findings of fact upon which its 
        decision is predicated), and shall issue and cause to 
        be served upon each party to the proceeding an order or 
        orders consistent with the provisions of this section.
          ``(3) Authority to modify orders.--The Administrator 
        may modify, terminate, or set aside any order issued 
        under this section--
                  ``(A) at any time, upon such notice, and in 
                such manner as the Administrator deems proper, 
                unless a petition for review is timely filed in 
                a court of appeals of the UnitedStates, as 
provided in paragraph (4)(B), and thereafter until the record in the 
proceeding has been filed in accordance with paragraph (4)(C); and
                  ``(B) upon such filing of the record, with 
                permission of the court.
          ``(4) Judicial review.--
                  ``(A) In general.--Judicial review of an 
                order issued under this section shall be 
                exclusively as provided in this subsection.
                  ``(B) Petition for review.--Any party to a 
                hearing provided for in this section may obtain 
                a review of any order issued pursuant to 
                paragraph (2) (other than an order issued with 
                the consent of the management official 
                concerned, or an order issued under subsection 
                (d)), by filing in the court of appeals of the 
                United States for the circuit in which the 
                principal office of the licensee is located, or 
                in the United States Court of Appeals for the 
                District of Columbia Circuit, not later than 30 
                days after the date of service of such order, a 
                written petition praying that the order of the 
                Administrator be modified, terminated, or set 
                aside.
                  ``(C) Notification to administration.--A copy 
                of a petition filed under subparagraph (B) 
                shall be forthwith transmitted by the clerk of 
                the court to the Adminsitrator, and thereupon 
                the Administrator shall file in the court the 
                record in the proceeding, as provided in 
                section 2112 of title 28, United States Code.
                  ``(D) Court jurisdiction.--Upon the filing of 
                a petition under subparagraph (A)--
                          ``(i) the court shall have 
                        jurisdiction, which, upon the filing of 
                        the record under subparagraph (C), 
                        shall be exclusive, to affirm, modify, 
                        terminate, or set aside, in whole or in 
                        part, the order of the Administrator, 
                        except as provided in the last sentence 
                        of paragraph (3)(B);
                          ``(ii) review of such proceedings 
                        shall be had as provided in chapter 7 
                        of title 5, United States Code; and
                          ``(iii) the judgment and decree of 
                        the court shall be final, except that 
                        the judgment and decree shall be 
                        subject to review by the Supreme Court 
                        of the United States upon certiorari, 
                        as provided in section 1254 of title 
                        28, United States Code.
                  ``(E) Judicial review not a stay.--The 
                commencement of proceedings for judicial review 
                under this paragraph shall not, unless 
                specifically ordered by the court, operate as a 
                stay of any order issued by the Administrator 
                under this section.''.

SEC. 6. REDUCTION OF FEES.

    (a) Two-Year Reduction of Section 7(a) Fees.--
          (1) Guarantee fees.--Section 7(a)(18) of the Small 
        Business Act (15 U.S.C. 636(a)(18)) is amended by 
        adding at the end the following:
                  ``(C) Two-year reduction in fees.--With 
                respect to loans approved during the 2-year 
                period beginning on October 1, 2002, the 
                guarantee fee under subparagraph (A) shall be 
                as follows:
                          ``(i) A guarantee fee equal to 1 
                        percent of the deferred participation 
                        share of a total loan amount that is 
                        not more than $150,000.
                          ``(ii) A guarantee fee equal to 2.5 
                        percent of the deferred participation 
                        share of a total loan amount that is 
                        more than $150,000, but not more than 
                        $700,000.
                          ``(iii) A guarantee fee equal to 3.5 
                        percent of the deferred participation 
                        share of a total loan amount that is 
                        more than $700,000.''.
          (2) Annual fees.--Section 7(a)(23)(A) of the Small 
        Business Act (15 U.S.C. 636(a)(23)(A)) is amended by 
        adding at the end of the following: ``With respect to 
        loans approved during the 2-year period beginning on 
        October 1, 2002, the annual fee assessed and collected 
        under the preceding sentence shall be in an amount 
        equal to 0.25 percent of the outstanding balance of the 
        deferred participation share of the loan.''.
    (b) Reduction of Section 504 Fees.--Section 503 of the 
Small Business Investment Act of 1958 (15 U.S.C. 697) is 
amended--
          (1) in subsection (b)(7)(A)--
                  (A) by redesignating clauses (i) and (ii) as 
                subclauses (I) and (II), respectively, and 
                moving the margins 2 ems to the right;
                  (B) by striking ``not exceed the lesser'' and 
                inserting ``not exceed--
                          ``(i) the lesser''; and
                  (C) by adding at the end the following:
                          ``(ii) 50 percent of the amount 
                        established under clause (i) in the 
                        case of a loan made during the 2-year 
                        period beginning on October 1, 2002, 
                        for the life of the loan; and''; and
          (2) by adding at the end the following:
    ``(i) Two-Year Waiver of Fees.--The Administration may not 
assess or collect any up front guarantee fee with respect to 
loans made under this title during the 2-year beginning on 
October 1, 2002.''.
    (c) Budgetary Treatment of Loans and Financings.--
Assistance made available under any loan made or approved by 
the Small Business Administration under section 7(a) of the 
Small Business Act (15 U.S.C. 636(a)) or financings made under 
title V of the Small Business Investment Act of 1958 (15 U.S.C. 
695 et seq.), during the 2-year period beginning on October 1, 
2002, shall be treated as separate programs of the Small 
Business Administration for purposes of the Federal Credit 
Reform Act of 1990 only.
    (d) Use of Funds.--The amendments made by this section to 
section 503 of the Small Business Investment Act of 1958, shall 
be effective only to the extent that funds are made available 
under appropriations Acts, which funds shall be utilized by the 
Administrator to offset the cost (as such term is defined in 
section 502 of the Federal Credit Reform Act of 1990) of such 
amendments.
    (e) Effective Date.--The amendments made by this section 
shall become effective on October 1, 2002.

Approved December 21, 2001.

                                
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