[House Report 110-400]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-400

======================================================================



 
          SMALL BUSINESS CONTRACTING PROGRAM IMPROVEMENTS ACT

                                _______
                                

October 22, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Ms. Velazquez, from the Committee on Small Business, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3867]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 3867) to update and expand the procurement programs 
of the Small Business Administration, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
  I. Purpose of the Bill and Summary..................................2
 II. Background and Need for Legislation..............................3
III. Hearings........................................................11
 IV. Committee Consideration.........................................14
  V. Committee Votes.................................................14
 VI. Section-by-Section Analysis of H.R. 3867........................17
VII. Congressional Budget Office Cost Estimate.......................22
VIII.Committee Estimate of Costs.....................................24

 IX. Oversight Findings..............................................24
  X. Statement of Constitutional Authority...........................24
 XI. Compliance With Public Law 104-4................................25
XII. Congressional Accountability Act................................25
XIII.Federal Advisory Committee Statement............................25

XIV. Statement of No Earmarks........................................25
 XV. Performance Goals and Objectives................................25
XVI. Changes in Existing Law Made by the Bill, as Reported...........25

                         I. Purpose and Summary

    The purpose of H.R. 3867, the Small Business Contracting 
Program Improvements Act (The Act) is to encourage 
participation by qualified small businesses, particularly 
veteran owned businesses, in the appropriate contracting 
programs offered under the supervision of the Small Business 
Administration. The Act amends key sections of the Small 
Business Act\1\ to assist small business participation, prevent 
fraud and bring consistency to the operation of the main 
contract assistance programs.
---------------------------------------------------------------------------
    \1\The Small Business Act, P.L. 85-536 (as amended), 15 
U.S.C.Sec. 631 et. seq.
---------------------------------------------------------------------------
    The Small Business Administration was preceded by federal 
agencies developed during wartime to help small businesses 
adjust to and compete for federal contracts. The predecessors 
to the Small Business Administration (SBA) can be traced back 
to World War II and efforts to ensure that small businesses 
contributed to the maintenance of a robust defense industrial 
base. The foundation of the agency in government procurement is 
reflected in the Small Business Act's dictate that small 
business concerns receive a ``fair proportion of the total 
purchases and contracts for the Government in each industry 
category * * * .''\2\ Despite this clear mandate in existence 
for more than 50 years, small businesses in certain key groups, 
including those owned by service-disabled veterans, women 
entrepreneurs and certain socially disadvantaged businesses' 
owners have not received their fair share of federal government 
contracts. In addition, certain programs that are offered by 
the SBA have grown so complex and removed from SBA oversight 
that they have become susceptible to misuse to a significant 
degree, by unqualified businesses. Although there are many 
reasons for these failures, H.R. 3867 adopts a measured 
approach to addressing some of the underlying problems. The 
Committee intends to dramatically improve on the capability of 
small businesses to earn their fair share of federal government 
contracts within the letter and spirit of the Small Business 
Act's goals.
---------------------------------------------------------------------------
    \2\Sec. 15(a) of the Small Business Act 15 U.S.C. Sec. 644(a).
---------------------------------------------------------------------------
    The bill rectifies significant contracting problems in two 
main areas: strengthening and modernizing these programs and 
setting standards to protect the integrity and consistency in 
the application of contract assistance programs so they will be 
used as Congress intended. Title I expands procurement 
opportunities for service-disabled veteran-owned businesses; a 
group that currently receives only a small fraction of their 
contracting goal. Further, it creates penalties for 
misrepresentation of a service-disabled veteran owned business 
classification and adopts a roadmap for providing information, 
advice and training to service-disabled veterans as prescribed 
by President.\3\ Finally, contracting officers who under 
current law must set aside certain contracts for HUBZones, 
would now have discretion to award such contracts to be used 
for service-disable veteran-owned businesses. Title II provides 
that the Administrator perform the necessary checks on 
applicants for participation in the various contracting 
assistance programs to ensure their business integrity and 
qualifications. This is already required by most programs but 
this establishes uniformity in all of the small business 
contracting programs. Title III sets out requirements for the 
SBA to implement the Women's Procurement Program immediately. 
Title IV strengthens the HUBZone program by verifying that 
small businesses receiving contracts under its authority are 
qualified. Finally Title V modernizes the 8(a) program to 
update and revise the qualification requirements, extend and 
realign the program term for participation and ensure that 
contracts issued under the authority of 8(a) go only to 8(a) 
qualified companies.
---------------------------------------------------------------------------
    \3\Executive Order 13360 regarding Service Disable Veterans, The 
White House, October 20, 2004.
---------------------------------------------------------------------------
    The Committee does not expect that these changes will 
alleviate all the problems associated with small business 
access to federal government contracts. Nevertheless, this bill 
eliminates some of the more egregious barriers to small 
business participation in a measured and balanced way. These 
barriers have been preventing some deserving businesses from 
achieving the goal of full participation and a fair share of 
federal contracts as set forth in the Small Business Act. This 
bill will help direct federal contracts to qualified small 
businesses furthering Congresses goals.

                II. Background and Need for Legislation

    In 2006, the federal government spent over $417 billion on 
goods and services in 8.3 million separate contracting actions. 
There is no reason to believe that the federal marketplace will 
not continue to grow at a record pace. Small businesses won 
approximately $80 billion in contracts which is about 21.5 
percent of the remaining prime contracts. The opportunity for 
free and predominantly fair competition for those contracts is 
an immensely important benefit for small businesses.
    Congress acknowledged the value of small business 
participation in federal contracting and has established 
federal policies to promote that objective for over 60 years. 
During World War II it was found to be in our national interest 
to ensure a strong and diverse industrial base. In Section 2 of 
the Small Business Act\4\ procurement goals are established as 
follows: ``it is the declared policy of the Congress that the 
Government should aid, counsel, assist and protect * * * the 
interests of small business concerns in order to preserve free 
competitive enterprise and to insure that a fair proportion of 
the total purchases and contracts or subcontracts for property 
and services for the Government * * * be placed with small 
business enterprises.'' Without competition, industrial 
concentration occurs and the government's purchasing options 
are dramatically reduced.
---------------------------------------------------------------------------
    \4\15 U.S.C. Sec. 631(a).
---------------------------------------------------------------------------
    Through a series of laws and procurement requirements 
Congress established a benchmark to give small businesses every 
opportunity to compete fairly for the award of federal 
contracts. The foundation for these efforts is the Small 
Business Act, passed in 1953, which has been steadily amended 
to adapt to meet the demands of the marketplace, to support 
important social and technological goals, and to conform to an 
increasingly sophisticated procurement system. Unfortunately, 
in recent years, as the number of contracts grew and 
competition for lucrative federal contracts intensified, the 
process became still more complex. To a certain extent, it has 
undermined the ability of small firms to compete for contracts.

   FEDERAL CONTRACTING AND BARRIERS FOR SMALL BUSINESS PARTICIPATION

    Since 2000, the U.S. government's buying has expanded by 
nearly 60 percent. The federal-wide goal is currently 23 
percent but SBA establishes individual agency goals that they 
then aggregate to obtain the overall 23 percent goal. In many 
cases, small businesses can handily fulfill the basic 
requirements of federal contracts and beat their competition; 
in fact, lower overhead, nimbler production and structural 
efficiencies often mean they can rise to provide services or 
products at the best price. While small firms often succeed in 
the private market, the structure of federal contracting 
creates institutional barriers that prevent smaller firms from 
participating. As such, competition is not always 
straightforward in the federal marketplace.
    The primary public policy rationale for small business 
contracting programs is the positive economic benefits they 
provide, as well as assisting small businesses overcome the 
complexities of the system. The economic benefits of these 
programs can be seen in two primary areas--market competition 
and local economic development. First, programs that are 
designed to increase and diversify small contractors with the 
intent of expanding the federal supplier base. This leads to 
increased competition, which results in higher quality, greater 
product variety, and lower prices. Second, these contracting 
initiatives lower barriers to entry in a wide range of markets 
for small businesses. This provides greater market access for 
small firms' goods and services. From an economic perspective, 
such access is critical to generating positive macroeconomic 
benefits, including higher job creation, wage growth, and 
greater income distribution.
    Of the government contracting dollars that are awarded 
through competition, nearly three-quarters are awarded through 
``full and open competition.'' Through this mechanism, small 
businesses compete directly with large corporations. 
Unfortunately, all but the most successful small firms are ill-
equipped to go head-to-head with a much bigger company who can 
overcome the complexities of federal contracting.
    As a result, the Small Business Act allows agencies to 
limit competition--or to ``set aside'' contracts for bidding 
only by small firms. Almost half of all contracting dollars 
awarded to small businesses use small business set-asides. If 
this mechanism did not exist, small firms, which account for 
50% of our gross domestic product, would receive only 11 
percent of all government contracting dollars.
    While these programs have assisted many small firms, there 
is need for improvement. Even in those cases where the law 
requires that certain contracts be set aside for competition 
between capable small businesses, there are often barriers for 
smaller firms. In some cases, firms representing themselves as 
qualified to compete for a set-aside do not meet participation 
eligibility requirement. In other cases, a small bidder wins an 
award and turns it over to a much larger subcontractor or 
joint-venturer; in effect a backdoor award to a large bidder. 
This undermines the goal of these programs.
    Most of the SBA's procurement initiatives are based on the 
theory that restricting competition to certain segments of the 
small business community is acceptable as long as two or more 
firms are expected to bid on a particular contract. In the same 
way that small firms have difficulty competing directly against 
large businesses, certain sectors of small businesses have 
unique challenges in competing against their more successful 
counterparts. Using set-asides, each category of small firms 
bids for contracts against other similarly situated businesses.

Federal contracting assistance programs

    The SBA is charged with administering a number of 
procurement initiatives targeting various sectors of the small 
business community. These programs have historically been 
effective in increasing the likelihood that small firms are 
able to obtain federal contracts.
            Service Disabled Veteran Procurement Program
    This initiative was created in 2003 to increase contracting 
opportunities for companies owned by service-disabled veterans, 
given that agencies were unable to accomplish the three percent 
procurement goal established as part of the Veterans 
Entrepreneurship and Small Business Development Act of 1999.\5\ 
It was implemented within 6 months thereafter. Agencies are 
allowed to limit competition for a contract among service-
disabled veteran-owned businesses. If there are not at least 
two qualified businesses to compete for the contract, an agency 
is able to enter into a contract with a service-disabled 
veteran-owned business without competition from other 
companies, thereby increasing the likelihood that these 
companies will access government contracts.
---------------------------------------------------------------------------
    \5\As revised, in the Veteran's Benefits Act of 2003 PL 108-183, 
Section 308.
---------------------------------------------------------------------------
    Despite these initiatives, small firms owned by service-
disabled veterans (SDVBs) continue to lag well behind the 3 
percent goal that was enacted in 1999. In large part, this is 
due to the limited authority agencies have to enter into sole 
source contracts with SDVBs. In fiscal year 2006, these 
businesses received less than 1 percent of federal government 
contracting dollars. SDVBs are the only business category which 
allows companies who falsely represent their status as SDVBs to 
avoid penalty. Finally, it is clear that the SBA has not 
fulfilled its obligations under Executive Order 13360 dated 
October 21, 2004 that orders all agencies to assist Service 
disabled veteran-owned small businesses in obtaining government 
contract and subcontract opportunities.
            HUBZone program
    This program's purpose is to provide community development 
for low-income and high unemployment areas through the award of 
federal contracting dollars to businesses that are located in 
these areas and employ local residents. The program allows 
federal contract preferences for firms that locate their 
primary business operations in a designated HUBZone. Further, 
35 percent of the company's employees must reside in a HUBZone 
area. HUBZone companies must be certified as such by the SBA. 
HUBZone companies can get price credits; have competition 
limited to only HUBZone firms, and the availability of sole 
source contracts.
    As the HUBZone program has matured, questions have been 
raised about whether the program is accomplishing its goals and 
whether it has been subject to fraud and abuse. Two SBA 
Inspector General reports have uncovered problems with assuring 
that firms were properly certified in the program and have 
remained eligible for future awards. The first report found 
that SBA did not have the internal controls to guarantee that 
only certified firms participated.\6\ The second report issued 
by the SBA IG found that 80 percent of the companies in the 
program were not eligible three years after they were 
approved.\7\ Small business witnesses expressed concern about 
how this could happen, the impact this has on small business 
contracts and what SBA intends to do to rectify the problem.
---------------------------------------------------------------------------
    \6\Audit Report of the Eligibility of 15 HUBZone Companies and a 
Review of the HUBZone Empowerment Contracting Program's Internal 
Controls; Inspector General, Small Business Administration, Audit 
Report #3-05, January 22, 2003. The IG's report stated that ``(w)e also 
found that the Office of HUBZone Empowerment's internal controls were 
inadequate to ensure that only eligible firms are certified and remain 
certified. Therefore, there is little assurance that the program will 
provide increased employment, investment and economic development for 
depressed areas. Since ineligible companies could receive HUBZone 
contracts, the program is also vulnerable to contracting fraud.''
    \7\HUBZone Program Examination and Recertification Processes; 
Inspector General, Small Business Administration Report #6-2--May 23, 
2006.
---------------------------------------------------------------------------
    Another concern about the program has been the parameters 
of a ``low-income'' area for the purposes of the HUBZone 
program designation. In an analysis of these areas, it appears 
the designation of HUBZone has been applied to some relatively 
affluent communities. Additionally, in a sampling by the 
Committee of 132 HUBZone contract awards, the Committee found 
that 4 of the contracts went to large companies, one contract 
was to a non-profit and 40 percent of the rest went to 
companies that had never been certified as a HUBZone company, 
as required under the statutes. The analysis revealed that 
federal agencies were not checking the accuracy of bidders 
claims to be HUBZone qualified to the detriment of deserving 
HUBZone participants. All these issues have led the Committee 
to take a stronger look at the rules surrounding HUBZones and 
the legislation reflects these concerns.
            Women's Federal Procurement Program
    This program was created to correct the imbalance in the 
number of women-owned businesses nationally when compared to 
their presence in the federal marketplace. The Women's 
Procurement Program was enacted as part of the Equity In 
Contracting For Women Act\8\ in 2000 but it has yet to be 
implemented by the SBA. It was to allow for restricted 
competition for federal contracts by women-owned businesses in 
federal contract involving work within industry sectors needed 
by the federal government that have historically underutilized 
them.
---------------------------------------------------------------------------
    \8\Equity in Contracting for Women Act, PL 106-554.
---------------------------------------------------------------------------
    The first requirement for this program was a study to 
determine what industries are underutilized by women-owned 
businesses. After a failed attempt to bring forth a meaningful 
study in 2001, and a court order directing SBA to get moving on 
implementing the program, the SBA entered into a contract in 
2006 to complete the study and results were released in April 
2007. The Rand Study\9\ had mixed results. Briefly, they found 
that if the number of contracts awarded was the criteria, 
women-owned businesses looked under-represented in a number of 
categories; however, if the dollar value of the contracts was 
used as a measure, the underutilization was less clear. Since 
that time, the SBA has promised to promulgate regulations to 
implement the program but no proposals have been forthcoming.
---------------------------------------------------------------------------
    \9\The Utilization of Women-Owned Small Business in Federal 
Contracting; Rand Corporation, April 2007.
---------------------------------------------------------------------------
    Both the House and Senate have called repeatedly for the 
SBA to move to implement the program anyway. Women business 
owners, whose representatives have gone to court numerous times 
to compel the SBA to move forward with the program, believe 
they have missed contracting opportunities worth billions of 
dollars. They testified that SBA's actions have thwarted the 
statutory procurement goal that five percent of contracting 
dollars go to women entrepreneurs which was established in 
1994. They are concerned that the program passed by Congress 
for their benefit is being stalled to death.
            8(a) program
    This program is the primary way that minority-owned 
businesses enter the federal marketplace. Established in the 
late 1960s, the 8(a) program was designed to promote individual 
minority entrepreneurship through federal contracts awards. Its 
purpose was to expand economic opportunities for minority 
individuals and to correct imbalances in the number of minority 
individuals compared to the number of minority entrepreneurs. 
Throughout its history, the program has developed more than 
20,000 companies that have received in excess of $100 billion 
in federal contracts.
    Due to changes in federal procurement policy and agency 
neglect, there have been no significant updates to the 8(a) 
program since 1988. As a result, the program is seen by many 
federal agencies as an antiquated contracting option. Over the 
past six years, SBA has requested significant reductions in 
funding, staffing and technical assistance for participant 
businesses, which has resulted in the 8(a) program moving away 
from its goal of providing business development to minority 
entrepreneurs. Particularly out of date is the net worth 
limitation that prohibits owners of 8(a) companies from having 
a net worth of over $250,000. This nearly 20 year old ceiling 
severely inhibits the ability of the owner to raise capital or 
even purchase necessary equipment. Though it may seem adequate 
when contemplating the wealth of a private citizen, the fact is 
that business owners require more access to capital than others 
to be able to maintain and grow their businesses. Witnesses as 
well as SBA officials recognized that the net worth threshold 
had not been adjusted adequately to reflect the current dollar 
values of running a business.
    Another concern has been the significant reduction in the 
proportion of eligible 8(a) companies that actually receive 
contracts. In FY 2006, only seven percent of companies that 
were participating in the 8(a) program during that year 
received a contract. This compares to thirty-one percent, seven 
years earlier. Contracts have also become exceedingly 
concentrated among the top contract recipients. In FY 2006, the 
top 10 companies (measured in terms of contract volume) 
received more than 40 percent of the contract dollars awarded 
to companies in the program. Compare that to FY 1999, when the 
top 10 recipients of 8(a) contract dollars received only 13 
percent of the contract dollars.
    Certain other problems were mentioned during the 
Committee's review of this important program. The 8(a) program 
is subject to a nine year time limit--divided between a five 
year developmental phase and a four year transitional phase. 
This has reinforced the focus of the program on transitioning 
companies out, rather than on the goal of business development. 
In 1995, a two-year moratorium was imposed on the ability of 
agencies to limit competition for contracts to only minority 
entrepreneurs, but was never lifted. This has resulted in 
minority entrepreneurs being the only segment of the small 
business community--comprised of women entrepreneurs, service-
disabled veteran businesses, and small firms located in low 
income or high unemployment areas--without a limited 
competition option available to them. In December of 2004, 
legislation was enacted to allow companies that were approved 
into the 8(a) program--because of its rigorous application 
process--to be deemed eligible for other federally-funded 
programs for small disadvantaged businesses without having to 
reapply. To this date, the implementation of this provision has 
been inconsistent at best. All of these flaws, particularly in 
combination, have tended to make the 8(a) program far less 
effective than it once was.

General contracting assistance policy concerns

            Size determination rules can exclude small businesses
    SBA utilizes ``size standards'' to determine whether a 
business entity is small and thus, eligible for government 
programs and preferences reserved for ``small business'' 
concerns. In establishing size, SBA will determine if the 
business is affiliated with another company. SBA uses five 
balancing tests in determining if companies are affiliated.\10\ 
SBA's regulations provide that restraints imposed on a 
franchisee relating to standardized quality, advertising, 
accounting format and other similar provisions, generally will 
not be considered in determining affiliation provided that the 
franchisee has the right to profit from its efforts and bears 
the risk of loss commensurate with ownership. Affiliation may 
arise, however, through other means, such as common ownership, 
common management or excessive restrictions upon the sale of 
the franchise interest. See 13 CFR 121.103 (i).
---------------------------------------------------------------------------
    \10\The five factors historically considered for affiliation are 
(1) whether the franchise owner bears the entire risk of financial loss 
from its business operations; (2) the ability of the franchise owner to 
retain the majority of the profits from its business; (3) whether the 
franchise owner maintains day-to-day control over its operations; (4) 
whether the franchise owner must provide significant amounts of 
financing without any recourse for indebtedness repayment to the 
franchisor; and (5) whether any commonality in ownership or management 
exists between the franchise owner and the franchisor. See 13 C.F.R. 
121.103.
---------------------------------------------------------------------------
    The Garvin Enterprises case, No. SIZ-4544 (April 4, 2003), 
involved a temporary employment agency operating under a 
franchise agreement, where the franchisor finances and 
processes the payroll of the temporary workers (not the 
employees of the franchisee) and invoices and collects customer 
accounts receivable in order to ensure payment to the temporary 
workers. In this case the SBA decided that the franchisee and 
franchisor are affiliated, thus disqualifying the independent 
franchisee from eligibility for small business programs. SBA 
also acknowledged in the case that ``this type of arrangement 
is customary for many firms in the temporary employment 
industry * * *. This is a policy question, and thus beyond this 
Office's jurisdiction.''
    The temporary staffing industry has experienced problems 
with agencies not paying, or underpaying, those who they place 
as temporary workers. As a result, franchisors in the industry 
have adopted a practice of handling the administrative 
responsibilities and advancing the payment of salaries and 
withholding the taxes for temporary employees for franchisees.
    Franchisees that satisfy all of the criteria that qualify 
them as independent small businesses should not be penalized 
simply because the franchisor has assumed responsibility for 
the administration and financing of the payroll and associated 
costs for the temporary employees to assure that the temporary 
employees are properly paid and that all withholding and other 
tax requirements are met.

H.R. 3867, Legislation addresses significant contract assistance 
        problems

    Most of the SBA's procurement programs have not been 
updated since their creation. For some initiatives, it has been 
nearly 20 years. During that time, the federal government has 
changed the way it buys, relegating many of these initiatives 
to second tier options for contracting officers. The Small 
Business Contracting Programs Improvements Act (H.R. 3867) 
addresses problems that have surfaced in these programs and 
modernizes provisions that are out of date.
    H.R. 3867 removes the barriers that have prevented agencies 
from entering into contracts without competition to service-
disabled veteran-owned small businesses, placing these 
businesses at the highest priority for small business 
contracting. It will also provide penalties if a company 
falsely represents itself as service-disabled veteran-owned. 
The measure directs SBA to implement and carry out certain 
obligations that were assigned to it by Executive Order 13360, 
codifying portions of that order into the Small Business Act. 
These responsibilities include providing information to service 
disabled veteran-owned businesses on contracting, advising 
agencies on how to expand procurements from service disabled 
veterans, and making assistance available to them on contract 
law and procedures. As a result of these provisions, the 
Committee expects to see an immediate and substantial increase 
in contracting opportunities for companies owned by service-
disabled veterans.
    Contracting fraud reduces the effectiveness of the SBA's 
contracting programs. It is important that bad actors are 
weeded out so that the programs can reach their intended 
beneficiaries. Participating in an SBA procurement program 
should be a privilege not a right. These contract assistance 
programs provide preferences over and above those received by 
other small businesses and are designed to level the playing 
field for a number of segments of the small business community 
that have historically been left behind. Given this, company 
owners should be of the highest integrity.
    Unfortunately, the agency has not implemented safeguards 
for any of the contracting programs. This raises substantial 
concern that owners found to be ineligible because of character 
issues for one SBA program, could participate in others that do 
not have the same integrity restrictions. The bill ensures that 
prior to the award of a contract, the agency will have verified 
business integrity of participants.
    The Committee believes that the contract assistance 
programs should be operated consistently and predictably. As it 
is now, each program is administered inconsistently by the SBA. 
For example, some of the programs have goals, others do not. 
All of the initiatives should have both prime and 
subcontracting goals. Subcontracting can be an effective 
alternative for small companies seeking to participate in the 
$410 billion federal marketplace. The bill requires each SBA 
procurement program to have both a prime contracting and a 
subcontracting goal.
    Three of the programs have a sole source contracting 
option. Each is subject to dollar limitations, above which, 
competition is required. However, the limitations which apply 
to all initiatives have not been modified since 1988 with the 
exception of a small increase in October of 2006. The 
legislation provides an inflationary adjustment to the sole 
source threshold to $5.1 million for contracts other than 
manufacturing for all SBA procurement programs. For 
manufacturing, the legislation comports the statute with the 
SBA's regulatory increase from October of 2006 to $5.5 million. 
Over this limit, contracts will require competition among each 
program's participants.
    H.R. 3867 ensures the implementation of the women's 
procurement program. It sets forth parameters the SBA must use 
to evaluate the under-representation of women entrepreneurs in 
federal contracting. This provision will implement the program 
upon enactment and sets out how the SBA should run the program. 
Companies receiving contracts awarded through the women's 
procurement program will be subject to eligibility protests by 
other small businesses that would otherwise have been eligible 
to receive the contract but for the contract being awarded 
using this program.
    The Act requires the SBA to perform on-site verifications 
of a HUBZone company's eligibility prior to the award of the 
company's second contract obtained with a HUBZone preference. 
This is designed to ensure that those HUBZones who are meeting 
the requirements of the programs will no longer have to compete 
with businesses fraudulently participating in the programs. The 
bill also limits the award of construction contracts with 
benefits provided by the program if the contract is more than 
150 miles from the principal office HUBZone. Companies 
receiving contracts awarded through the HUBZone program will be 
subject to eligibility protests by other small businesses that 
would otherwise have been eligible to receive the contract but 
for the contract being awarded to a HUBZone program 
participant. This will maximize the intent of the program in 
achieving local economic development.
    H.R. 3867 will modernize the 8(a) program in several ways. 
It will address the 8(a) net worth limitation raising it to 
$550,000 and raise the personal net worth provisions once a 
small business is in the program allowing for growth. This is 
an inflationary adjustment to update the program to meet 
current business operations. It will also encourage growth 
among these businesses. It will also add one year to the 8(a) 
program time, and divide the program into a six year 
developmental phase and a four year transitional phase. This 
program also allows for small businesses concerns who are not 
8(a) participants to protest section 8(a) awards. This 
integrity measure will further the goal of eliminating fraud 
and abuse.
    The problem of the treatment of franchises in the temporary 
employee industry is resolved by recognizing that the industry 
practice of franchisors financing the payroll of the temporary 
workers which protects the temporary workers from being 
underpaid. The Committee believes that such industry practice 
should not be given any probative weight in applying the 
traditional affiliation factors for business size 
determinations.
    H.R. 3867, the Small Business Contracting Program 
Improvements Act continues the Committee's work on 
reauthorizing programs administered by the U.S. Small Business 
Administration. The Act takes several steps to modify and 
update the SBA's procurement programs and to reduce contracting 
fraud. Tens of thousands of small firms rely on these programs 
to provide entree to the federal marketplace. Given that each 
of the contract assistance programs is currently experiencing 
higher rates of participation than ever, it is crucial that 
these initiatives are structured to provide these companies 
with the maximum opportunity to receive benefits.

                             III. Hearings

    During the 110th Congress the Committee has held a number 
of hearings which touched on various aspects of the SBA's 
contracting assistance programs and three hearings to address 
this subject directly.
    On March 21, 2007 the Subcommittee on Contracting and 
Technology held a hearing on the Implementation of the Women's 
Procurement Program and Federal Government Efforts in 
Contracting with Women-Owned Businesses. The first panel of 
federal agency witnesses included the Honorable Jovita 
Carranza, the Deputy Administrator for the Small Business 
Administration; Dr. Frank Spampinato, Chief Acquisition Officer 
for the Department of Energy; Mr. Larry Warder, Chief Financial 
Officer for the Department of Education; and, Thomas Luedtke, 
Assistant Administrator for Procurement at the National 
Aeronautic and Space Administration. All reviewed the status of 
their agencies efforts to meet their goals with regard to 
contracting with women-owned businesses and individual 
successes within their programs. They went over their reports 
and data related to their accomplishments and their plans to 
support and include women-owned businesses in contract efforts 
in the future. Under questioning, Deputy Carranza went through 
the current status of the implementation of the Women's 
Procurement Program. The report had been completed and 
regulations were being prepared. Other agency representatives 
explained why they had fallen short of their women-owned 
business contracting goals.
    During the second panel on March 21, 2007, Ms. Margot 
Dorfman the CEO of the U.S. Women's Chamber of Commerce 
reviewed the history of women-owned business ``goaling'' and 
the Women's Federal Procurement Program. Her group had filed 
suit in federal court to force SBA to implement the program and 
prevailed with the Court declaring that the SBA ``had 
sabotaged, whether intentional or not, the implementation of a 
procurement program * * *.'' She testified that Congress should 
step in and demand the immediate implementation of the program 
and that each year of delay costs women-owned businesses 
billions of dollars in contract award opportunities. Ms. 
Christina Lomasney, the President and CEO of Isotron 
Corporation, explained that her company performs research for 
the federal government under a contract with the Department of 
Defense. Isotron has performed well and other women-owned 
businesses could perform well if they were more fully utilized. 
She urged more programs that could benefit women-owned high 
tech businesses such as SBIR, Mentor-Protege and the 
implementation of the Women's Federal Procurement Program. The 
next witness, Ms. Karyl Smith of Iowa Valley Appraisal has done 
work with the U.S. Department of Agriculture but believes there 
are many other federal agencies that should be trying harder to 
use women-owned businesses like hers. Federal Emergency 
Management Agency, Homeland Security and Housing and the 
Department of Housing and Urban Development all have massive 
appraisal duties and are all not meeting their goals. The final 
business owner to testify was Ms. Sheryl Mendenhall-Roberts, 
CEO of CCS Holdings, a company that is a third party 
administrator for worker's compensation claims and risk 
management services. They are capable of saving the country 
millions in unnecessary and mistaken payments of claims that 
could be negotiated or eliminated with some professional 
review. She believes small business programs, including the 
Women's Federal Procurement Program would force agencies to 
look harder for these kinds of money saving services that are 
well-used in the private sector.
    On September 19, 2007 the Committee on Small Business held 
a hearing on The Effectiveness of the SBA's Contracting 
Programs and the Challenges They Face. The Honorable Jovita 
Carranza, the Deputy Administrator of the SBA reviewed the 
administration's plans for the future of these programs as well 
as facts and data on the program's accomplishments. SBA 
indicated they supported the programs but acknowledged some 
difficulty in ensuring that the programs were delivered to 
appropriate parties, a problem that had been reported from a 
number of sources including the General Accountability Office 
and the SBA Inspector General. Also, she was unable to specify 
a date when the Women's Procurement Program would finally be 
implemented now seven years after passage. The Deputy pointed 
out that they were working on regulations. This program allows 
contracting officers to steer contracts to women business 
owners in industry sectors where they were being underutilized 
in federal contracts.
    The non-government witnesses appearing at the September 19, 
2007 hearing included Mr. Harry Alford on behalf of the 
National Black Chamber of Commerce who testified strongly in 
favor of modernizing the 8(a) program, updating its net-worth 
provisions and extending the term. Mr. Ronald F. Chamrin 
appeared for the American Legion and urged the committee to 
take action to increase the participation in contract 
assistance programs by service-disabled, veteran owned firms. 
Ms. Margot Dorfman, of the U.S. Women's Chamber of Commerce 
addressed the administration's failure thus far, after seven 
years and in spite of specific orders from the U.S. District 
Court, to implement the Women's Procurement program. She urged 
Congress to act to make sure such delays did not continue. Mr. 
Ron Newlan speaking for the HUBZone Contractors National 
Council pointed out the success of the HUBZone in providing 
contracts and employment in low income HUBZone areas when it 
was used appropriately. His concern was that the program had 
been poorly implemented and underutilized by federal 
contracting agencies which resulted in lost opportunities for 
businesses and low-income communities. He asked the Committee 
to remind federal agencies to use the HUBZones more and 
acknowledged that fraud should not be allowed in the program. 
Mr. P.J. Goel, President, Goel Services, Inc., Washington, D.C. 
testified on behalf of the Associated General Contractors and 
pointed out that SBA and the participating federal agencies no 
longer have the funds for proper oversight and management of 
contracting assistance programs. AGC would like to see some of 
the programs consolidated and their requirements be consistent. 
Finally Dr. Trevor Brown, Assistant Professor, John Glenn 
School of Public Affairs, The Ohio State University felt that 
government contracting was becoming burdensome and unwieldy. He 
was concerned that the Congress not lose focus of the ultimate 
goal to purchase goods and services at the lowest possible 
price. Any new legislation should search for ways to achieve 
Congress's goals with the least imposition on federal agencies 
trying to do their job. Complexity, in his view, has become the 
biggest barrier to small business participation in contract 
assistance programs.
    On October 4, 2007 the full Committee held a legislative 
hearing on the Committee draft of the Small Business 
Contracting Programs Improvement Act which had been circulated 
for discussion. The hearing was attended by the Honorable 
Steven Preston, the Administrator for the Small Business 
Administration. Mr. Preston expressed the Administration's 
concerns over a number of portions of the bill. He pointed out 
that SBA was introducing in the near future a regulation that 
would reduce fraud in the HUBZone program by requiring strong 
review of HUBZone status recipients. They also oppose on-site 
inspections of HUBZone recipients because of costs and 
logistics. Likewise SBA believes the 150 mile construction 
limit for a HUBzone company is overly restrictive. SBA is 
trying to improve the processes that eliminate backlogs that 
exist in the 8(a) program. The agency says it plans to hold 
other participating agencies accountable to meeting SBA 
regulations on 8(a) contracts. SBA does not see that the 
$250,000 net worth requirement has been a barrier to entry to 
the 8(a) program. Also testifying was Mr. Joseph Sharpe on 
behalf of the American Legion who supported the legislation to 
establish a firm set-aside for service-disabled veteran-owned 
businesses and veteran-owned businesses. He also requested that 
more help be given to those groups and suggested that the 
Committee move to codify the Executive Order 13360. They would 
ultimately like to see the program for service-disabled 
veteran-owned businesses have parity with the 8(a) preferences.
    On a follow-up panel of small business organizations, Ms. 
Margot Dorfman representing the U.S. Women's Chamber of 
Commerce supported the quick implementation of the Women's 
Procurement Program and the increased attention to the 
utilization of the 8(a) program. Ms. Dorfman also wanted action 
taken to ensure integrity of the participants in the contract 
assistance programs to ensure that all businesses that won 
awards were qualified and worthy of performing contracts for 
the government. Finally she asked that the Committee keep in 
mind the current technical difficulty and cost in bidding and 
participating in federal contracting. Mr. Todd McCracken, the 
Executive Director of the National Small Business Association, 
urged stronger enforcement against fraud and more attention to 
the complexity in participating in small business programs. 
NSBA feels that both are significant barriers to full small 
business participation. Mr. Steven Denlinger, U.S. Hispanic 
Chamber of Commerce, discussed the problems that have arisen 
since the SBA delegated their authority in contracting under 
the 8(a) program in 1993. He also pointed out that anything 
that slows the 8(a) contracting process will divert contracting 
officers away from the program and thus takes contracts away 
from small and disadvantaged businesses. The Hispanic Chamber 
asks the Committee to consider this if it adds requirements to 
the programs that are to be done by either small businesses or 
contract officers. He also felt that special incentives in the 
program that benefit Alaska Native Corporation contracts were 
hurting the 8(a) program. Finally Ms. Angela Styles of the law 
firm of Crowell & Moring, but also a former director of the 
Office of Federal Procurement Policy of the Office of 
Management and Budget, felt that part of the problems with 
fraud were caused by the complexity of the system. It is hard 
to comply with and hard to check. The Committee should consider 
things that make the systems easier for small businesses, not 
harder. She shared the view that complexity in itself is a 
significant barrier to entry for some businesses who might 
otherwise be successful contractors.

                      IV. Committee Consideration

    The Committee on Small Business met in open session on 
October 18, 2007 to consider H.R. 3867 and any amendments.

                           V. Committee Votes

    The bill, H.R. 3867, the Small Business Contracting Program 
Improvement Act was marked up by the Committee on Small 
Business on October 18, 2007 at 10 a.m. An amendment was 
offered by Representative Akin to strike Section 501 but was 
withdrawn by unanimous consent. An amendment was offered by Mr. 
Bartlett to strike Section 101(b) but it was defeated on a 
rollcall vote of 8 yea and 16 nay at 11:15 a.m. An amendment 
was offered by Mr. Bartlett to strike Section 201 but the 
amendment was withdrawn by unanimous consent. An amendment was 
offered by Mr. Bartlett to strike Section 502 but was withdrawn 
by unanimous consent. No further amendments were offered. The 
Committee on Small Business adopted and ordered H.R. 3867 
reported to the House of Representatives by a recorded vote of 
21 yeas and 4 nays at 11:27 a.m.


   VI. Section-by-Section Analysis of the Small Business Contracting 
                  Programs Improvement Act--H.R. 3867


     Title I. Ensuring Government Contract Opportunities for Small 
      Businesses Owned and Controlled by Service-Disabled Veterans


Section 101. Expanding procurement opportunities

    This provision will require agencies to enter into 
contracts with service-disabled veteran-owned companies without 
first requiring that agencies ensure that only one company can 
perform a contract. The provision also ensures that the 
procurement program for service-disabled veteran-owned small 
businesses has parity with the 8(a) program. The provision 
gives discretion to contracting officers whether or not to set 
aside contracts where two HUBZones qualified companies could 
compete for the contract. This is intended to open up more 
contracts for service-disabled, veteran-owned companies that 
are qualified to perform the contract. This section will 
provide an immediate, substantial and measurable increase in 
both the number and dollar amount of contracts awarded to 
companies owned and controlled by service-disabled veterans.

Section 102. Penalties for misrepresentation

    This section provides for the assessment of civil penalties 
against any company that falsely represents itself as a 
service-disabled veteran-owned company for the purpose of 
obtaining federal contracts. The Committee believes that the 
SBA must ensure that businesses that misrepresent their status 
as small, small disadvantaged, women-owned, 8(a), or service-
disabled veteran-owned are held accountable for these false 
statements. This protects certified participants in the 
programs from having to compete against businesses unfairly 
being awarded contracts. In particular, the Committee believes 
that false representation in the Central Contractor Registry 
(CCR) fulfills the requirement in Section 16(d) that a company 
is misrepresenting its status in order to obtain a prime 
contract.

Section 103. Implementation of Executive Order 13360

    This provision requires the SBA to comply with the 
requirements set forth in the President's Executive Order 13360 
dated October 20, 2004. Under this Order, the Administrator of 
the SBA is required to designate an appropriate entity within 
the SBA to provide service-disabled veteran-owned companies 
(SDVBs) with information and assistance concerning 
participation in federal contracting; advise and assist other 
agencies in their strategies to expand procurement 
opportunities for SDVBs; and make training assistance on 
federal contract law, procedures and practices available to 
SDVBs.

     Title 2. Protecting Taxpayers and Ensuring Program Consistency


Section 201. Requiring business integrity of small business concerns

    This provision prevents a company from receiving benefits 
under these contracting programs if the business owner has been 
shown not to have integrity. This codifies that SBA shall have 
a greater role in ensuring this integrity. If an applicant is 
found to lack character, the application shall be rejected.
    If a business is found to lack character as a result of 
these investigations, the Committee intends that the SBA make 
proper notification to agencies awarding contracts. The 
Committee further intends that investigations regarding 
business integrity under this section shall be conducted in the 
same manner as indicated in SOP 80 05 3 or successor agency 
procedures.
    Improving the integrity of these contracting programs 
serves the interest of program participants. It eliminates 
those businesses that are unfairly participating in the 
programs at a minimal cost to those businesses properly in the 
program.

Section 202. Establishment of goals

    This provision ensures that each agency is subject to a 
goal for contracting with small firms participating in all of 
SBA's contracting programs. The Committee intends that the goal 
for companies participating in the 8(a) program shall be, at a 
minimum, 70 percent of the separate goal for small 
disadvantaged businesses.

Section 203. Small business concern subcontracting policy

    This section sets forth the policy that while prime 
contracts awarded by an agency to a small business are 
important, it is equally important for small firms in SBA's 
procurement programs to participate as subcontractors on large 
projects.

Section 204. Increased size of available contracts

    This provision provides an inflationary adjustment to the 
limitation on contracts--other than for manufacturing--awarded 
without competition to $5.1 million. Over this amount, 
competition will be required. The section also comports the 
statutory limitation for manufacturing contracts of $5.5 
million to the existing SBA regulation.

        Title 3. Expanding opportunities for women entrepreneurs


Section 301. Implement the women's procurement program

    This provision will allow agencies to limit competition for 
federal contracts only to women business owners, in industries 
that have been closed to them. It also provides parameters for 
requiring the SBA to evaluate industry under-representation to 
ensure that the program will be implemented upon the 
legislation's enactment. In order to be eligible for restricted 
competition contracts, women entrepreneurs must be economically 
disadvantaged. The Administrator will have the authority to 
waive this requirement in industries that are substantially 
under-represented by women-owned businesses. This section also 
allows small businesses who would otherwise be able to receive 
a contract but for the fact that the contract was placed in the 
Women's Procurement Program, to protest the eligibility of a 
particular company as woman-owned.
    The Committee intends that the following industries be 
deemed as under-represented by women-owned businesses for the 
purpose of this section. The Committee does not intend any 
further finding by an agency or department head that the agency 
has overtly or inadvertently discriminated against women 
entrepreneurs. Rather, the Committee intends that, upon 
enactment, agencies act immediately at their discretion to 
enter into contracts with women-owned businesses in these 
industries.

------------------------------------------------------------------------
          2-Digit (NAICS) Code                       Industry
------------------------------------------------------------------------
11.....................................  Forestry.
21.....................................  Mining.
22.....................................  Utilities.
23.....................................  Construction.
31.....................................  Manufacturing.
32.....................................  Manufacturing.
33.....................................  Manufacturing.
42.....................................  Wholesale Trade.
44.....................................  Retail Trade.
45.....................................  Retail Trade.
48.....................................  Transportation.
49.....................................  Transportation.
51.....................................  Information.
52.....................................  Finance and Insurance.
53.....................................  Real Estate and Rental and
                                          Leasing.
54.....................................  Professional, Scientific and
                                          Technical Services.
56.....................................  Administrative and Support,
                                          Waste Management and
                                          Remediation Services.
61.....................................  Educational Services.
62.....................................  Health Care and Social
                                          Assistance.
71.....................................  Arts, Entertainment and
                                          Recreation.
72.....................................  Accommodation and Food
                                          Services.
81.....................................  Other Services.
------------------------------------------------------------------------

              Title 4. Strengthening Community Development


Section 401. On-site verification

    This section will require an on-site inspection by the SBA 
of HUBZone-approved companies prior to the award of their 
second contract obtained with a HUBZone contracting preference. 
It also requires the SBA, within 90 days of enactment, to 
develop procedures to ensure that HUBZone companies notify the 
SBA prior to their award of a HUBZone contract subject to an 
inspection. The SBA will have 30 days to review the eligibility 
of the company for the award. If the company is found not to be 
eligible, the contract will be terminated. This section does 
not require multiple on-site inspections of a company, nor does 
it require a review prior to every HUBZone contract award. This 
provision will address the long-standing concerns of fraud in 
the HUBZone program expressed by the SBA's Inspector General.
    The Committee intends that the SBA conduct an investigation 
of the principal office of a HUBZone small business concern 
prior to the award of the second contract received by that 
concern as a direct result of an award under Section 31 of the 
Act. If a company has previously received a contract award 
prior to enactment of this language, the Committee intends that 
the next contract received after enactment is treated as the 
second contract for the purpose of this section. The Committee 
further intends that this section does not require multiple on-
site inspections of a company, nor does it require a review 
prior to every HUBZone contract award. The Committee intends 
that the Administrator act expeditiously to develop standards 
through which HUBZone small business concerns can notify the 
Administrator of pending awards. The Committee also intends 
that on-site investigations occur within 30 days of the award 
of a contract under section 31 of the Small Business Act. If a 
company is found not to be eligible as a HUBZone small business 
concern, the Committee intends that the contract is terminated 
and that the company is assessed penalties under section 16(d) 
of the Small Business Act. The Committee intends that the 
Administrator place a high priority on ensuring this provision 
is administered as intended.

Section 402. Limitation on construction contracts

    This section will limit the award of construction contracts 
with the HUBZone preference if the work will be performed in 
excess of 150 miles of the primary office location of the 
HUBZone-approved company. This will ensure that HUBZone 
benefits are provided to the local economy.

Section 403. Allowing small business concerns that are not HUBZone 
        program participants to protest HUBZone awards

    This provision allows small businesses who would otherwise 
have been able to receive a contract but for the fact that the 
contract was placed in the HUBZone program, to protest the 
eligibility of a particular HUBZone company to receive the 
award.
    The Committee intends this provision to allow small 
business concerns in similar industries to be able to protest 
to the SBA the eligibility of a company to receive a contract 
under section 31 of the Small Business Act. The Committee does 
not intend this provision to allow small business concerns to 
protest the discretion or authority of an agency to enter into 
contracts under the authority provided by Section 31 of the 
Act.

                 Title 5. Modernizing the 8(a) Program


Section 501. Modernizing the section 8(a) program net worth limitations

    This section provides for an inflationary adjustment in the 
net worth limitations to 8(a) program participants. At the time 
of program entry a company owner will be required to have a 
personal net worth less than $550,000--subtracting equity in 
the owner's primary residence and in their business. Once a 
company has been approved into the program, the net worth 
limitation will no longer apply. The Committee intends that 
this provision modify not only the net worth limitations in 
place for the SBA's 8(a) program, but also for programs that 
rely on this definition including the SBA's Small Disadvantaged 
Business certification program and the Department of 
Transportation's Disadvantaged Business Enterprise program. The 
Committee also intends that the $550,000 personal net worth 
limitation only apply to the 8(a) program and not to any 
program that already has a personal net worth limitation that 
exceeds $550,000.
    The Committee also intends that the current personal net 
worth ceiling for the 8(a) program be lifted once a company is 
approved into the 8(a) program. The Committee further intends 
that personal net worth ceilings in place for the SBA's Small 
Disadvantaged Business certification program and the Department 
of Transportation's Disadvantaged Business Enterprise program 
are lifted once a company is approved into these programs. 
These changes will promote growth and expansion for program 
participants. It removes the current disincentive to expand.

Section 502. Extension of the section 8(a) program term

    The provision extends the amount of time a company may 
participate in the 8(a) program term by one year. This 
adjustment was made to reflect the current trend that shows 
small businesses are not able to participate in the first few 
years they enter the program. The program will also be divided 
into a 6-year developmental phase and a 4 year transitional 
phase.

Section 503. Report on implementation

    This provision will require the SBA to annually report to 
Congress on progress towards implementing Section 155 of 
Division K of P.L. 108-447. This section allows participants in 
the SBA's 8(a) program eligibility for other federally funded 
programs for small disadvantaged businesses without having to 
reapply.

Section 504. Allowing small business concerns that are not section 8(a) 
        program participants to protest section 8(a) awards

    This provision allows small businesses who would otherwise 
have been able to receive a contract but for the fact that the 
contract was placed in the 8(a) program, to protest the 
eligibility of a particular 8(a) company to receive the award.
    The Committee intends this provision to allow small 
business concerns in similar industries to be able to protest 
to the SBA the eligibility of a company to receive a contract 
under Section 8(a) of the Small Business Act. The Committee 
does not intend this provision to allow small business concerns 
to protest the discretion or authority of an agency to enter 
into contracts under the authority provided by Section 8(a) of 
the Act. This provision is designed to further the integrity of 
the 8(a) program.

                         Title 6. Other Matters


Section 601. Affiliation for certain franchises

    Section 601 of the bill provides that in determining 
whether a franchisee is affiliated with a franchiser in the 
temporary employee services industry, the SBA will not consider 
whether or not the franchisor finances the payroll of the 
temporary staffing personnel (including billing, collecting, 
and remitting client fees), nor the tax status of the temporary 
staffing personnel. The Committee intends that the SBA continue 
to apply its historically-considered affiliation factors in 
determining whether a business is affiliated with another 
business or the franchisor in the temporary staffing industry. 
However, the Committee acknowledges the industry practice of 
franchisors financing the payroll of the temporary workers 
which protects the temporary workers from being underpaid. The 
Committee believes that such industry practice should not be 
given any probative weight in applying the traditional 
affiliation factors.

             VII. Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 22, 2007.
Hon. Nydia M. Velazquez,
Chairwoman, Committee on Small Business,
 House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3867, the Small 
Business Contracting Program Improvements Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                         Robert A. Sunshine
                                   (For Peter R. Orszag, Director).
    Enclosure.

H.R. 3867--Small Business Contracting Program Improvements Act

    Summary: H.R. 3867 would make several changes to programs 
administered by the Small Business Administration (SBA) that 
help small businesses compete for government contracts. The 
bill would expand contracting opportunities for certain 
veterans and increase the size limits on federal contracts that 
would be eligible for small business preferences.
    In addition, H.R. 3867 would require background checks for 
participants in several contracting-preference programs, 
require SBA personnel to visit contractors participating in its 
HUBZone program, and expand the population of businesses that 
can protest the award to certain contracts. The bill also would 
impose penalties on small businesses that misrepresent the 
owner's status as a veteran disabled through military service.
    Based on information from SBA, CBO estimates that 
implementing H.R. 3867 would cost $11 million in 2008 and $72 
million over the 2008-2012 period, subject to the availability 
of appropriated funds. Enacting H.R. 3867 would increase civil 
penalties and thus could affect revenues, but CBO estimates 
that such effects would not be significant. Enacting the bill 
would not affect direct spending.
    H.R. 3867 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3867 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2008     2009     2010     2011     2012
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Background Checks:
    Estimated Authorization Level..................................        1        1        1        1        1
    Estimated Outlays..............................................        1        1        1        1        1
Study on Representation of Women:
    Estimated Authorization Level..................................        0        0        0        0        1
    Estimated Outlays..............................................        0        0        0        0        1
On-Site Verification:
    Estimated Authorization Level..................................       13       13       13       14       14
    Estimated Outlays..............................................       10       12       13       13       14
Award Protests:
    Estimated Authorization Level..................................        1        1        1        1        1
    Estimated Outlays..............................................        0        1        1        1        1
    Total:
        Estimated Authorization Level..............................       15       15       15       16       17
        Estimated Outlays..........................................       11       14       15       15       17
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted early in fiscal year 2008 and that the 
necessary funds would be appropriated in that and each 
subsequent fiscal year.

Spending subject to appropriation

    Under current law, SBA's 8(a) program offers business 
development and technical assistance as well as small business 
preferences for federal contracting and procurement. The 
HUBZone program provides federal contracting and procurement 
preferences to small businesses operating in historically 
underutilized business zones (HUB zones). H.R. 3867 would make 
changes to those programs as well as others that assist small 
businesses in competing for contracts with federal agencies. 
Subject to appropriation of the necessary amounts, CBO 
estimates that implementing H.R. 3867 would cost $11 million in 
2008 and $72 million over the 2008-2012 period.
    Background Checks. Section 201 of the bill would require 
SBA to perform background checks on owners of small businesses 
who apply to the 8(a) program and on participants in the 
HUBZone program that would be entering into a second federal 
contract. Based on information from SBA, CBO estimates that 
about 300 8(a) applicants and about 1,300 HUBZone applicants 
would be subject to this provision each year. The bill also 
would require SBA to perform background checks on a random 
sample of small-business owners participating in contracting-
preference programs who are women or veterans disabled in 
military service. CBO estimates that implementing this 
provision would cost about $1 million in 2008 and $5 million 
over the 2008-2012 period, subject to appropriation of the 
necessary amounts.
    Study on Representation of Women in Federal Contracting. 
Section 301 would require SBA to conduct a study every five 
years to identify industries in which women-owned small 
businesses are under-represented in federal contracting. Based 
on information from SBA, CBO estimates that implementing this 
provision would cost $1 million over the 2008-2012 period.
    On-Site Verification. Section 401 would require SBA to 
perform an on-site inspection to determine whether a HUBZone 
participant is, in fact, qualified to participate in the 
program. Such inspections would occur only when a HUBZone 
participant notifies SBA that it is to be awarded a second 
contract under the program. Based on information from SBA, CBO 
estimates that approximately 5,000 on-site visits would be 
performed each year. Subject to appropriation of the necessary 
amounts, CBO estimates that implementing this provision would 
cost about $10 million in 2008 and $62 million over the 2008-
2012 period.
    Award Protests. The bill would expand the parties eligible 
to protest the award of government contracts to participants in 
the 8(a) and HUBZone programs as well as programs that give 
preference to small businesses owned by women. Under current 
law, only parties with a direct stake in the outcome of the 
protest are eligible to lodge a protest. The bill would allow 
any small business to challenge the eligibility of a program 
participant to receive a contract award. Based on information 
from SBA, CBO expects that SBA would need four additional full-
time equivalent investigators to handle the additional 
protests. We estimate that implementing this provision would 
cost $4 million over the 2008-2012 period.

Revenues

    Section 102 could result in the collection of additional 
civil penalties, which are recorded on the budget as revenues, 
from small businesses that misrepresent the owner's status as a 
veteran disabled through military service. CBO estimates that 
any additional revenues would not be significant because of the 
relatively small number of cases likely to be affected.
    Intergovernmental and private-sector impact: H.R. 3867 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal Costs: Susan Willie; Impact 
on State, Local, and Tribal Governments: Elizabeth Cove; Impact 
on the Private Sector: MarDestinee Perez.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                   VIII. Committee Estimate of Costs

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 1867. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

                         IX. Oversight Findings

    In accordance with clause (2)(b)(1) of rule X of the Rules 
of the House of Representatives, the oversight findings and 
recommendations of the Committee on Small Business with respect 
to the subject matter contained in H.R. 3867 are incorporated 
into the descriptive portions of this report.

                X. Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, Section 8, clause 18, of the 
Constitution of the United States.

                  XI. Compliance With Public Law 104-4

    H.R. 3867 contains no unfunded mandates.

                 XII. Congressional Accountability Act

    H.R. 3867 does not relate to the terms and conditions of 
employment or access to public services or accommodations with 
the meaning of section 102(b)(3) of P.L. 104-1.

               XIII. Federal Advisory Committee Statement

    H.R. 3867 does not establish or authorize the establishment 
of any new advisory committees.

                     XIV. Statement of No Earmarks

    Pursuant to clause 9 of Rule XXI, H.R. 3867 does not 
contain any congressional earmarks, limited tax benefits, or 
limited tariff benefits as defined in clause 9(d), 9(e), or 
9(f) of rule XXI.

                  XV. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 3867 includes a number of provisions designed to 
update and to improve the Small Business Administration's 
contracting assistance programs including the Disabled Veterans 
Contracting Program, the HUBZone Program, the Women's 
Procurement Program, and the 8(a) program.

       XVI. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SMALL BUSINESS ACT

           *       *       *       *       *       *       *


  Sec. 3. (a)(1) * * *

           *       *       *       *       *       *       *

  (5) Special rule relating to franchises in the temporary 
employee services industry.--In determining whether a 
franchisee is affiliated with a franchisor in the temporary 
employee services industry, the Administrator shall--
  (A) disregard--
          (i) whether the franchisor finances the payroll of 
        the temporary staffing personnel (including billing, 
        collecting, and remitting client fees); and
          (ii) whether the temporary staffing personnel are 
        treated as employees or independent contractors of the 
        franchisor for tax or other purposes; and
  (B) consider the processing of payroll and billing by a 
franchisor as customary and common practice in the temporary 
employee services industry that does not provide probative 
weight.

           *       *       *       *       *       *       *

  Sec. 8. (a)(1) It shall be the duty of the Administration and 
it is hereby empowered, whenever it determines such action is 
necessary or appropriate--
  (A) * * *

           *       *       *       *       *       *       *

  (D)(i) A contract opportunity offered for award pursuant to 
this subsection shall be awarded on the basis of competition 
restricted to eligible Program Participants if--
  (I) * * *
  (II) the anticipated award price of the contract (including 
options) will exceed [$5,000,000] $5,500,000 in the case of a 
contract opportunity assigned a standard industrial 
classification code for manufacturing and [$3,000,000] 
$5,100,000 (including options) in the case of all other 
contract opportunities.

           *       *       *       *       *       *       *

  (22) Rules similar to the rules of paragraphs (5) and (6) of 
subsection (m) shall apply for purposes of this subsection.

           *       *       *       *       *       *       *

  (d)(1) [It is the policy of the United States that small 
business concerns, small business concerns owned and controlled 
by veterans, small business concerns owned and controlled by 
service-disabled veterans, qualified HUBZone small business 
concerns, small business concerns owned and controlled by 
socially and economically disadvantaged individuals, and small 
business concerns owned and controlled by women, shall have the 
maximum practicable opportunity to participate in the 
performance of contracts let by any Federal agency, including 
contracts and subcontracts for subsystems, assemblies, 
components, and related services for major systems.] It is the 
policy of the United States that small business concerns, small 
business concerns owned and controlled by veterans, small 
business concerns owned and controlled by service-disabled 
veterans, qualifying HUBZone small business concerns, small 
business concerns owned and controlled by socially and 
economically disadvantaged individuals, small business concerns 
participating in the program established by section 8(a), and 
small business concerns owned and controlled by women, shall 
have the maximum practicable opportunity to participate in the 
performance contracts let by any Federal agency, including 
contracts and subcontracts for subsystems, assemblies, 
components, and related services for major systems. It is 
further the policy of the United States that its prime 
contractors establish procedures to ensure the timely payment 
of amounts due pursuant to the terms of their subcontracts with 
small business concerns, small business concerns owned and 
controlled by veterans, small business concerns owned and 
controlled by service-disabled veterans, qualified HUBZone 
small business concerns, small business concerns owned and 
controlled by socially and economically disadvantaged 
individuals, and small business concerns owned and controlled 
by women.

           *       *       *       *       *       *       *

  (m) Procurement Program for Women-Owned Small Business 
Concerns.--
          [(1) Definitions.--In this subsection, the following 
        definitions apply:
                  [(A) Contracting officer.--The term 
                ``contracting officer'' has the meaning given 
                such term in section 27(f)(5) of the Office of 
                Federal Procurement Policy Act (41 U.S.C. 
                423(f)(5)).
                  [(B) Small business concern owned and 
                controlled by women.--The term ``small business 
                concern owned and controlled by women'' has the 
                meaning given such term in section 3(n), except 
                that ownership shall be determined without 
                regard to any community property law.
          [(2) Authority to restrict competition.--In 
        accordance with this subsection, a contracting officer 
        may restrict competition for any contract for the 
        procurement of goods or services by the Federal 
        Government to small business concerns owned and 
        controlled by women, if--
                  [(A) each of the concerns is not less than 51 
                percent owned by one or more women who are 
                economically disadvantaged (and such ownership 
                is determined without regard to any community 
                property law);
                  [(B) the contracting officer has a reasonable 
                expectation that two or more small business 
                concerns owned and controlled by women will 
                submit offers for the contract;
                  [(C) the contract is for the procurement of 
                goods or services with respect to an industry 
                identified by the Administrator pursuant to 
                paragraph (3);
                  [(D) the anticipated award price of the 
                contract (including options) does not exceed--
                          [(i) $5,000,000, in the case of a 
                        contract assigned an industrial 
                        classification code for manufacturing; 
                        or
                          [(ii) $3,000,000, in the case of all 
                        other contracts;
                  [(E) in the estimation of the contracting 
                officer, the contract award can be made at a 
                fair and reasonable price; and
                  [(F) each of the concerns--
                          [(i) is certified by a Federal 
                        agency, a State government, or a 
                        national certifying entity approved by 
                        the Administrator, as a small business 
                        concern owned and controlled by women; 
                        or
                          [(ii) certifies to the contracting 
                        officer that it is a small business 
                        concern owned and controlled by women 
                        and provides adequate documentation, in 
                        accordance with standards established 
                        by the Administration, to support such 
                        certification.
          [(3) Waiver.--With respect to a small business 
        concern owned and controlled by women, the 
        Administrator may waive subparagraph (2)(A) if the 
        Administrator determines that the concern is in an 
        industry in which small business concerns owned and 
        controlled by women are substantially underrepresented.
          [(4) Identification of industries.--The Administrator 
        shall conduct a study to identify industries in which 
        small business concerns owned and controlled by women 
        are underrepresented with respect to Federal 
        procurement contracting.]
          (1) Definition.--In this subsection, the term ``small 
        business concern owned and controlled by women'' has 
        the meaning given such term in section 3(n), except 
        that ownership shall be determined without regard to 
        any community property law.
          (2) Authority to restrict competition.--
                  (A) In general.--In accordance with this 
                subsection, a contracting officer may restrict 
                competition for any contract for the 
                procurement of goods or services by the Federal 
                Government to small business concerns owned and 
                controlled by women, if--
                          (i) each of the concerns is not less 
                        than 51 percent owned by 1 or more 
                        women who are economically 
                        disadvantaged (and such ownership is 
                        determined without regard to any 
                        community property law);
                          (ii) the contracting officer has a 
                        reasonable expectation that 2 or more 
                        small business concerns owned and 
                        controlled by women will submit offers 
                        for the contract;
                          (iii) the contract is for the 
                        procurement of goods or services with 
                        respect to an industry identified 
                        pursuant to paragraph (4);
                          (iv) in the estimation of the 
                        contracting officer, the contract award 
                        can be made at a fair and reasonable 
                        price; and
                          (v) each concern is certified in a 
                        manner described in subparagraph (B).
                  (B) Acceptance of certification.--For 
                purposes of subparagraph (A)(v), a contracting 
                officer is required to accept a small business 
                concern's certification as a small business 
                concern owned and controlled by women when such 
                certification is made by--
                          (i) a Federal agency or a State or 
                        local government;
                          (ii) a national certifying entity 
                        approved by the Administrator; or
                          (iii) the small business concern, 
                        when such concern certifies to the 
                        contracting officer that it is a small 
                        business concern owned and controlled 
                        by women and provides adequate 
                        documentation in accordance with 
                        standards established by the 
                        Administrator to support such 
                        certification.
          (3) Waiver.--With respect to a small business concern 
        owned and controlled by women, the Administrator may 
        waive paragraph (2)(A)(i) if--
                  (A) such concern is in an industry identified 
                pursuant to paragraph (4); and
                  (B) the Administrator determines that such 
                concern is in an industry in which small 
                business concerns owned and controlled by women 
                are substantially under-represented in Federal 
                contracting.
          (4) Identification of industries.--
                  (A) In general.--Not less often than every 
                five years, the Administrator shall conduct a 
                study to identify, for purposes of paragraphs 
                (2)(A)(iii) and (3)(A), industries in which 
                small business concerns owned and controlled by 
                women are under-represented in Federal 
                contracting. The parameters for the study shall 
                be as follows:
                          (i) For purposes of this paragraph, 
                        the Administrator shall identify an 
                        industry if, and only if, the share of 
                        Federal contracts awarded to small 
                        business concerns owned and controlled 
                        by women in such industry is small 
                        relative to the prevalence of business 
                        concerns owned and controlled by women 
                        in the pool of business concerns in 
                        such industry that have at least one 
                        employee.
                          (ii) The study shall measure 
                        utilization and availability by--
                                  (I) using the two best 
                                available data sources;
                                  (II) including only business 
                                concerns that have at least one 
                                employee; and
                                  (III) measuring only Federal 
                                contracts awarded for amounts 
                                over $25,000.
                          (iii) The study shall include four 
                        sets of disparity measurement tables to 
                        compute disparity ratios. The four sets 
                        are--
                                  (I) all business concerns in 
                                the United States relative to 
                                the number of Federal contracts 
                                awarded to small business 
                                concerns owned and controlled 
                                by women;
                                  (II) small business concerns 
                                owned and controlled by women 
                                that have demonstrated an 
                                interest in or that have 
                                secured Federal contracts 
                                relative to the number of 
                                Federal contracts awarded to 
                                small business concerns owned 
                                and controlled by women;
                                  (III) all business concerns 
                                in the United States relative 
                                to the dollar amounts of 
                                Federal contracts awarded to 
                                small business concerns owned 
                                and controlled by women; and
                                  (IV) small business concerns 
                                owned and controlled by women 
                                that have demonstrated an 
                                interest in or that have 
                                secured government contracts 
                                relative to the dollar amounts 
                                of Federal contracts awarded.
                  (B) Determination by head of department or 
                agency.--Until such time as the Administrator 
                completes the identification of industries 
                required by subparagraph (A), the determination 
                as to whether an industry is one in which small 
                business concerns owned and controlled by women 
                are under-represented in Federal contracting 
                shall be made by the head of the department or 
                agency for which the contract is to be 
                performed.
                  (C) Deadline.--Not later than 90 days after 
                the date of the enactment of this subparagraph, 
                the Administrator shall--
                          (i) ensure the completion of the 
                        first study required by subparagraph 
                        (A);
                          (ii) approve national certifying 
                        entities for the purposes of paragraph 
                        (2)(B)(ii);
                          (iii) establish procedures required 
                        by paragraph (5)(A); and
                          (iv) establish standards described in 
                        paragraph (2)(B)(iii).
          (5) Enforcement; penalties.--
                  (A) Verification of eligibility.--In carrying 
                out this subsection, the Administrator shall 
                establish procedures relating to--
                          (i) the filing, investigation, and 
                        disposition by the Administration of 
                        any challenge to the eligibility of a 
                        small business concern to receive 
                        assistance under this subsection 
                        (including a challenge, filed by an 
                        interested party, relating to the 
                        veracity of a certification made or 
                        information provided to the 
                        Administration by a small business 
                        concern under paragraph [(2)(F)] 
                        (2)(B)); and
                          (ii) verification by the 
                        Administrator of the accuracy of any 
                        certification made or information 
                        provided to the Administration by a 
                        small business concern under paragraph 
                        [(2)(F)] (2)(B).
                  (B) Examinations.--The procedures established 
                under subparagraph (A) may provide for program 
                examinations (including random program 
                examinations) by the Administrator of any small 
                business concern making a certification or 
                providing information to the Administrator 
                under paragraph [(2)(F)] (2)(B).

           *       *       *       *       *       *       *

                  (D) Protests by small business concerns.--For 
                purposes of this paragraph, the term 
                ``interested party'' shall include any small 
                business concern.

           *       *       *       *       *       *       *

  Sec. 15. (a) * * *

           *       *       *       *       *       *       *

  (g)(1) [The President shall annually establish Government-
wide goals for procurement contracts awarded to small business 
concerns, small business concerns owned and controlled by 
service disabled veterans, qualified HUBZone small business 
concerns, small business concerns owned and controlled by 
socially and economically disadvantaged individuals, and small 
business concerns owned and controlled by women.] The President 
shall annually establish Government-wide goals for procurement 
contracts awarded to small business concerns, small business 
concerns owned and controlled by service-disabled veterans, 
qualified HUBZone small business concerns, small business 
concerns owned and controlled by socially and economically 
disadvantaged individuals, small business concerns 
participating in the program established by section 8(a), and 
small business concerns owned and controlled by women. The 
Government-wide goal for participation by small business 
concerns shall be established at not less than 23 percent of 
the total value of all prime contract awards for each fiscal 
year. The Government-wide goal for participation by small 
business concerns owned and controlled by service-disabled 
veterans shall be established at not less than 3 percent of the 
total value of all prime contract and subcontract awards for 
each fiscal year. The Governmentwide goal for participation by 
qualified HUBZone small business concerns shall be established 
at not less than 1 percent of the total value of all prime 
contract awards for fiscal year 1999, not less than 1.5 percent 
of the total value of all prime contract awards for fiscal year 
2000, not less than 2 percent of the total value of all prime 
contract awards for fiscal year 2001, not less than 2.5 percent 
of the total value of all prime contract awards for fiscal year 
2002, and not less than 3 percent of the total value of all 
prime contract awards for fiscal year 2003 and each fiscal year 
thereafter. The Government-wide goal for participation by small 
business concerns owned and controlled by socially and 
economically disadvantaged individuals shall be established at 
not less than 5 percent of the total value of all prime 
contract and subcontract awards for each fiscal year. The 
Government-wide goal for participation by small business 
concerns owned and controlled by women shall be established at 
not less than 5 percent of the total value of all prime 
contract and subcontract awards for each fiscal year. 
Notwithstanding the Government-wide goal, each agency shall 
have an annual goal that presents, for that agency, the maximum 
practicable opportunity for small business concerns, small 
business concerns owned and controlled by service-disabled 
veterans, qualified HUBZone small business concerns, small 
business concerns owned and controlled by socially and 
economically disadvantaged individuals, and small business 
concerns owned and controlled by women to participate in the 
performance of contracts let by such agency. The Administration 
and the Administrator of the Office of Federal Procurement 
Policy shall, when exercising their authority pursuant to 
paragraph (2), insure that the cumulative annual prime contract 
goals for all agencies meet or exceed the annual Government-
wide prime contract goal established by the President pursuant 
to this paragraph.

           *       *       *       *       *       *       *

  (3) Each agency shall, in consultation with the 
Administrator, establish goals for the usage, as prime 
contractors, of small business concerns that participate in the 
program under section 8(a).
  (h)(1) * * *

           *       *       *       *       *       *       *

  (4) Each prime contractor shall, in consultation with the 
Administrator, establish goals for the usage, as 
subcontractors, of small business concerns that participate in 
the program under section 8(a).

           *       *       *       *       *       *       *

  Sec. 16. (a) * * *

           *       *       *       *       *       *       *

  (d)(1) Whoever misrepresents the status of any concern or 
person as a ``small business concern'', a ``qualified HUBZone 
small business concern'', a ``small business concern owned and 
controlled by socially and economically disadvantaged 
individuals'', a ``small business concern owned and controlled 
by service-disabled veterans'', or a ``small business concern 
owned and controlled by women'', in order to obtain for oneself 
or another any--
          (A) * * *

           *       *       *       *       *       *       *


SEC. 31. HUBZONE PROGRAM.

  (a) * * *
  (b) Eligible Contracts.--
          (1) * * *
          (2) Authority of contracting officer.--
        Notwithstanding any other provision of law--
                  (A) a contracting officer may award sole 
                source contracts under this section to any 
                qualified HUBZone small business concern, if--
                          (i) * * *
                          (ii) the anticipated award price of 
                        the contract (including options) will 
                        not exceed--
                                  (I) [$5,000,000] $5,500,000, 
                                in the case of a contract 
                                opportunity assigned a standard 
                                industrial classification code 
                                for manufacturing; or
                                  (II) [$3,000,000] $5,100,000, 
                                in the case of all other 
                                contract opportunities; and

           *       *       *       *       *       *       *

                  (B) a contract opportunity [shall] may be 
                awarded pursuant to this section on the basis 
                of competition restricted to qualified HUBZone 
                small business concerns if the contracting 
                officer has a reasonable expectation that not 
                less than 2 qualified HUBZone small business 
                concerns will submit offers and that the award 
                can be made at a fair market price; and

           *       *       *       *       *       *       *

          (5) On-site verification of status.--
                  (A) Verification.--When a small business 
                concern that has previously been awarded a 
                contract under paragraph (2)(A) or (2)(B) is to 
                be awarded a second contract under paragraph 
                (2)(A) or (2)(B), the Administrator shall 
                perform an on-site inspection to determine 
                whether such small business concern is a 
                qualified HUBZone small business concern. This 
                paragraph does not require such an inspection 
                before the award of a third or subsequent 
                contract. This paragraph does not prevent a 
                second contract from being awarded before such 
                inspection is completed.
                  (B) Notification by small business concern.--
                The Administrator shall require a small 
                business concern to notify the Administrator, 
                prior to being awarded a second contract under 
                paragraph (2)(A) or (2)(B), of such business 
                concern's attempt to be awarded a second 
                contract under paragraph (2)(A) or (2)(B). Not 
                later than 90 days after the date of the 
                enactment of this subparagraph, the 
                Administrator shall establish procedures to 
                implement this subparagraph.
          (6) Limit hubzone program construction contracts in 
        or near a hubzone.--A small business concern may not 
        obtain a construction contract by reason of the HUBZone 
        program unless the construction project is located in 
        or near the HUBZone in which the small business concern 
        has its principal place of business. The Administrator 
        shall prescribe standards for determining when a 
        project is located ``near'' a HUBZone for purposes of 
        this paragraph, except that under no circumstances can 
        a project located more than 150 miles from a HUBZone be 
        located ``near'' that HUBZone.
  (c) Enforcement; Penalties.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Protests by small business concerns.--For 
        purposes of this subsection, the term ``interested 
        party'' shall include any small business concern.

           *       *       *       *       *       *       *


SEC. 36. PROCUREMENT PROGRAM FOR SMALL BUSINESS CONCERNS OWNED AND 
                    CONTROLLED BY SERVICE-DISABLED VETERANS.

  (a) Sole Source Contracts.--In accordance with this section, 
a contracting officer [may] shall award a sole source contract 
to any small business concern owned and controlled by service-
disabled veterans if--
          (1) such concern is determined to be a responsible 
        contractor with respect to performance of such contract 
        opportunity [and the contracting officer does not have 
        a reasonable expectation that 2 or more small business 
        concerns owned and controlled by service-disabled 
        veterans will submit offers for the contracting 
        opportunity];
          (2) the anticipated award price of the contract 
        (including options) will not exceed--
                  (A) [$5,000,000] $5,500,000, in the case of a 
                contract opportunity assigned a standard 
                industrial classification code for 
                manufacturing; or
                  (B) [$3,000,000] $5,100,000, in the case of 
                any other contract opportunity; and

           *       *       *       *       *       *       *

  (f) Implementation of Executive Order 13360.--The 
Administrator shall--
          (1) provide small business concerns owned and 
        controlled by service-disabled veterans with 
        information and assistance concerning participation in 
        Federal contracting;
          (2) advise and assist other agencies in their 
        strategies to expand procurement opportunities for such 
        concerns; and
          (3) make training assistance on Federal contract law, 
        procedures, and practices available to such concerns.

           *       *       *       *       *       *       *


SEC. 38. REQUIRING BUSINESS INTEGRITY OF SMALL BUSINESS CONCERNS.

  (a) Section 8(a) Program Background Check.--No applicant may 
be approved for participation in the section 8(a) program 
unless the Administrator first performs a background check on 
the applicant and determines that the applicant does not lack 
business integrity.
  (b) Hubzone Program Background Check.--No award of a second 
contract under the authority of section 31(b)(2)(A) or 
31(b)(2)(B) may be made unless the Administrator first performs 
a background check on the applicant and determines that the 
applicant does not lack business integrity.
  (c) Random Background Check.--The Administrator shall have 
random background checks performed on owners and officers of 
small business concerns that have been awarded a contract under 
section 8(m), 36(a), or 36(b) to determine whether such owners 
and officers lacks business integrity.
                              ----------                              


  SECTION 155 OF THE SMALL BUSINESS REAUTHORIZATION AND MANUFACTURING 
                         ASSISTANCE ACT OF 2004

SEC. 155. PARTICIPATION IN FEDERALLY FUNDED PROJECTS.

  Any small business concern that is certified, or otherwise 
meets the criteria for participation in any program under 
section 8(a) of the Small Business Act (15 U.S.C. 637(a)), 
shall not be required by any State, or political subdivision 
thereof, to meet additional criteria or certification, 
unrelated to the capability to provide the requested products 
or services, in order to participate as a small disadvantaged 
business in any program or project that is funded, in whole or 
in part, by the Federal Government. Annually, concurrent with 
the submission of the Small Business Administration's budget 
request to the Congress, the Administrator shall submit to the 
Committee on Small Business and Entrepreneurship of the Senate 
and the Committee on Small Business of the House of 
Representatives a report detailing progress the Administrator 
has made towards the implementation of this section.

                                  
