[Senate Report 111-343]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 635
111th Congress                                                   Report
                                 SENATE
 2d Session                                                     111-343

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



 
         SMALL BUSINESS CONTRACTING REVITALIZATION ACT OF 2010

                                _______
                                

               September 29, 2010.--Ordered to be printed

                                _______
                                

        Ms. Landrieu, from the Committee on Small Business and 
               Entrepreneurship, submitted the following

                              R E P O R T

                         [To accompany S. 2989]

    On March 4, 2010, the Senate Committee on Small Business 
and Entrepreneurship unanimously reported the Small Business 
Contracting Revitalization Act of 2010 (S. 2989), a bill to 
provide for the updating of small business contracting 
statutes, and for other purposes. Having considered S. 2989, 
the Committee reports favorably thereon with a manager's 
amendment and recommends that the bill, as amended, do pass.

                            I. INTRODUCTION

    The Small Business Contracting Revitalization Act of 2010 
(S. 2989) is a bill to update the contracting provisions 
pertaining to small business procurement. In addition to making 
significant improvements to the Small Business Administration's 
procurement programs, the bill also authorizes several new 
oversight and pilot program initiatives. This bipartisan bill 
was introduced as an original bill by Chair Mary L. Landrieu on 
February 4, 2010, with Ranking Member Olympia J. Snowe as an 
original cosponsor. During markup of the bill on March 4, 2010, 
the Committee adopted, by a unanimous voice vote, a substitute 
amendment offered by Senator Landrieu. The bill was 
subsequently adopted, as amended, by a unanimous voice vote.
    The Small Business Contracting Revitalization Act of 2010 
seeks to revitalize and renew small business procurement law to 
better assist the small business community, and to meet the 
changing needs of the 21st century entrepreneur. Since the 
beginning of the 111th Congress, the Committee has held a 
series of hearings and meetings to analyze the Small Business 
Administration's (SBA) programs and services pertaining to 
federal contracting, including the SBA's prime, subcontracting, 
8(a), women-owned, Historically Underutilized Business Zone 
(HUBZone), service-disabled veterans, and Small Disadvantaged 
Business programs, in anticipation of introducing new 
legislation that builds on the Agency's success of helping 
small businesses create jobs and drive America's economy. 
Stakeholders of these programs provided important insights and 
recommendations to the Committee. S. 2989 aims to address many 
of the recommendations in Federal contracting, but does not 
address the SBA's socioeconomic programs.
    On September 22, 2009, the Committee held a roundtable 
titled ``Small Business Contracting: Ensuring Opportunities for 
America's Small Business.'' The roundtable focused on the 
challenges that small business owners face when attempting to 
contract with the Federal government, including those faced by 
small businesses attempting to subcontract with large primes. 
The Committee took note that lack of privity, or legal 
relationship between the Federal government and subcontractors, 
is often cited as the primary reason why the government lacks 
the authority to protect subcontractors. Consequently, the 
General Services Administration's (GSA) Deputy Chief 
Acquisition Officer, David Drabkin, testified during the 
roundtable that the Federal government avoids becoming involved 
in the relationship between prime and subcontractors.
    During the roundtable, the Committee also heard testimony 
stating that more communication between subcontractors and 
prime contractors may help protect subcontractors. The 
Committee believes that innovative ways to protect 
subcontractors are needed. As such, S. 2989 seeks to address 
this issue by establishing several new protections for 
subcontractors. Finally, the Committee also heard testimony 
about the negative impact that bundling has on the availability 
of contracting opportunities for small businesses.
    Furthermore, the Committee held hearings on the same 
subject during the 110th Congress. On July 18, 2007, the 
Committee held a hearing entitled, ``Increasing Government 
Accountability and Ensuring Fairness in Small Business 
Contracting.'' The hearing focused on barriers to success for 
small businesses, such as complicated regulations, contract 
bundling, size standards with loopholes for businesses that are 
other than small, a lack of protections for subcontractors, and 
a GSA schedule that is difficult to navigate.
    The Committee heard from a panel of Administration 
witnesses and a panel of small business owners about the need 
for updating federal procurement laws. One of the top concerns 
of small business owners was the lack of opportunities for 
small businesses caused by the federal government's growing 
reliance on contract bundling. The Committee also heard from a 
number of small businesses about the lack of well-trained small 
business contracting professionals in the Federal government. 
The Committee believes that added protections are necessary to 
expand opportunities for small businesses as both prime and 
subcontractors.

                        II. DESCRIPTION OF BILL


                       Title I--Contract Bundling

    Contract bundling is the consolidation of contracts in a 
manner that unduly restricts competition, and was originally 
prohibited under the Competition in Contracting Act (CICA) of 
1984. The Small Business Reauthorization Act of 1997 
supplemented CICA by defining the bundling of contract 
requirements as the consolidation of two or more procurement 
requirements for goods or services previously provided or 
performed (or suitable for performance) under separate, smaller 
contracts, into a solicitation of offers for a single contract 
that is likely to be unsuitable for award to a small business 
concern. The requirement that at least a portion of the 
contract be previously performed by small firms allows Federal 
agencies to avoid bundling review by declaring large 
consolidations to be new work. The statute allows the Agency to 
bundle its requirements if the Agency has performed sufficient 
market research and has justified the bundled action on a cost 
saving basis.
    Generally, a bundled procurement will be found necessary 
and justified if an agency will derive measurable substantial 
benefits as a result of consolidating the requirements into one 
large contract. If the requirement involves ``Substantial 
bundling'' and the contract value exceeds specified 
thresholds--for example, $2 million for most agencies, $5 
million for the GSA, National Aeronautics and Space 
Administration (NASA), and Department of Energy (DOE), and $7 
million for the Department of Defense (DoD)--the contracting 
agency must conduct an internal analysis of the contract, 
submit a contract to SBA Procurement Center Representatives for 
review, and take actions to maximize small business 
participation as subcontractors at various tiers under the 
contract.
    Bundling or consolidation of Federal contracts tends to 
deprive small firms of business opportunities with the Federal 
government. The size of a contract, geographic spread of 
performance, or multiplicity of requirements can prevent small 
firms from capitalizing on their competitive advantages, 
including attention to customer service, superior rates of 
innovation, and lower administrative costs. According to the 
Office of Federal Procurement Policy (OFPP), small businesses 
lose more than $30 dollars for every $100 awarded on a bundled 
contract.\1\ As a result, contract bundling drastically reduces 
the Federal government's supplier base, particularly the 
defense industrial base. According to the SBA Office of 
Advocacy, during the time period that contract bundling began 
to increase, the number of small business contractors receiving 
new contract awards dropped more than 50 percent, from 26,506 
in FY 1991 to 11,651 in FY 2000.\2\
---------------------------------------------------------------------------
    \1\Contract Bundling a Strategy for Increasing Federal Contracting 
Opportunities for Small Business October 2002 (Executive Office of the 
President Office of Management and Budget Office of Federal Procurement 
Policy).
    \2\Id.
---------------------------------------------------------------------------
    In Report No. 105-62 on the 1997 SBA Reauthorization Act, 
this Committee stated,

          Often, bundling results in contracts of a size or 
        geographic dispersion that small businesses cannot 
        compete for or obtain. As a result, the government can 
        experience a dramatic reduction in the number of 
        offerors. This practice, intended to reduce short term 
        administrative costs, can result in a monopolistic 
        environment with a few large businesses controlling the 
        market supply.

    Clearly, the fiscal case for reduction in consolidated 
contracts is strong. For example, the SBA's Breakout 
Procurement Center Representatives Program--which breaks up 
large contracts for competition--has saved the Federal 
government approximately $2.5 billion since 1985.
    In October 2002, the Office of Management and Budget's 
(OMB) Office of Federal Procurement Policy announced a 9-point 
initiative to reduce contract bundling by: (1) ensuring 
accountability of senior agency management for improving 
contracting opportunities for small businesses; (2) ensuring 
timely and accurate reporting of contract bundling information 
through the President's Management Council; (3) requiring 
contract bundling reviews for task and delivery orders under 
multiple award contract vehicles; (4) requiring agency review 
of proposed acquisitions above specified ``substantial 
bundling'' thresholds for unnecessary and unjustified contract 
bundling; (5) requiring identification of alternative 
acquisition strategies for the proposed bundling of contracts 
above specified thresholds and written justification when 
alternatives involving less bundling are not used; (6) 
mitigating the effects of contract bundling by strengthening 
compliance with subcontracting plans; (7) mitigating the 
effects of contract bundling by facilitating the development of 
small business teams and joint ventures; (8) identifying best 
practices that maximize small business opportunities; and (9) 
dedicating agency Office of Small Disadvantaged Business 
Utilization (OSDBUs) to the President's Small Business Agenda.
    Reviews by the Government Accountability Office (GAO) and 
the SBA Inspector General (IG) found that many Federal agencies 
are confused about the statutory definition of bundling. 
According to GAO report 04-454, Impact of Strategy to Mitigate 
Effects of Contract Bundling on Small Business is Uncertain, 
agencies claim to be confused by the legal definition of 
bundling, and officials at two of the four agencies contacted 
did not know they were mandated to report all potential 
bundling. Additionally, the SBA IG's Audit of the Contract 
Bundling Program, No. 5-20, found that agencies and the SBA 
disagree on the definition of bundling. The SBA failed to 
review more than 80 percent of contracts designated as bundled. 
According to the IG's report, this failure resulted in almost 
$400 million of potential lost opportunities for small 
businesses. Testimony during the July 18, 2007, hearing 
entitled ``Increasing Accountability and Ensuring Fairness in 
Federal Contracting'' indicated that Federal agencies do not 
practice unbundling of government contracts.
    The Committee believes there is an urgent need for Federal 
agencies to follow SBA's guidance on bundling and to close the 
loopholes that lead to contract bundling. The Committee 
believes that the recommendations of the GAO and the SBA IG on 
contract bundling must be fully implemented. Specifically, 
better data on incidents and impact of bundling must be 
collected.
    To mitigate the harmful practices posed by contract 
bundling and consolidation, through this bill, the Committee 
requires that each agency solicit bids from small business 
joint ventures and teams on each solicitation above the 
substantial bundling threshold. Further, the bill requires each 
agency to report on its efforts to reduce bundling. In 
addition, this bill requires agencies to post their anti-
bundling policies on their websites, as well as a list of all 
bundled contracts and the rationale for bundling.
    The Committee believes that Procurement Center 
Representatives (PCRs) and Commercial Market Representatives 
(CMRs) can and should be more effective in breaking up bundled 
contracts. This bill requires a study of the effectiveness of 
SBA PCRs and CMRs.
    Further, this bill requires that the head of each Federal 
department or agency ensures that the decisions made by that 
department or agency regarding consolidation of contract 
requirements are made with a view towards providing small 
businesses with appropriate opportunities to participate as 
prime contractors and subcontractors.
    The SBA's PCRs monitor Federal agency procurement activity 
to ensure that (1) appropriate steps are taken to provide 
contract awards to small businesses, (2) agencies meet their 
small business contracting goals, and (3) proposed contracts 
that could involve consolidated procurement requirements are 
identified and resolved. PCR responsibilities include: 
reviewing proposed acquisitions and recommending alternative 
procurement strategies; identifying qualified small business 
sources; conducting reviews of small business programs at 
Federal contracting agencies to ensure compliance with small 
business policies; counseling small businesses; and sponsoring 
and participating in small business conferences and training.
    Unfortunately, the number of PCRs has shrunk dramatically 
in the last 15 years, and the Committee believes that the 
failure to maintain sufficient levels of PCRs has diminished 
the SBA's ability to carry out its statutory mandate. Reports 
prepared by the GAO disclose that the SBA is struggling to 
accomplish its mission and lacks the assurances that PCRs are 
reviewing proposed acquisition strategies to identify barriers 
to small business participation. The GAO also found that the 
number of PCR-recommended small business set-asides has 
declined by more than half in the last ten years.
    More important than not, the Committee recognizes that 
acquisition is a technical discipline that requires knowledge 
and experience to manage effectively. Therefore, tasking these 
responsibilities to other SBA employees as a part-time function 
will not address insufficient staffing levels and is not 
acceptable. The Committee believes that locating PCRs in the 
field and involving them in local buying activities improves 
the ability of these individuals to effectively advocate and 
assist small businesses with the procurement process.
    The Committee believes that preventing contract 
consolidation is an appropriate way to expand opportunities for 
small businesses. The justification for consolidation of 
contracts has historically been that such consolidations reduce 
personnel and administrative costs. However, the Committee 
heard testimony to the contrary from Mr. Bill Miera in its May 
22, 2007 hearing on minority entrepreneurship. Mr. Miera 
testified that overhead costs associated with contract 
consolidation far outweigh any potential cost saving benefits 
claimed by consolidation proponents. Therefore, this 
legislation establishes that a contract consolidation is not 
considered to be justified and necessary based solely on 
administrative and personnel costs savings.
    The Committee believes that small businesses will benefit 
from ``teaming'' together to bid on larger federal contracts. 
Many small businesses have been shut out of federal contracting 
because they do not have the capacity to perform all facets of 
a contract. At present, it is difficult for a number of small 
businesses to band together to complete a large project and 
meet the requirement that a small business perform at least 51 
percent of the work. This bill contains provisions designed to 
improve contracting opportunities for small businesses by 
allowing Federal agencies to aggregate the portion of a 
contract performed by separate small businesses in determining 
whether the performance of the contract is in compliance with 
federal regulations.
    The Committee further believes that providing technical 
assistance and resources for small businesses interested in 
teaming and forming joint ventures will encourage more such 
business ventures. Accordingly, this bill establishes a Small 
Business Teaming Center Pilot Program for the purpose of 
expanding technical assistance opportunities for small 
businesses, as well as for expanding the pool of vendors with 
the capacity to compete for bundled contracts.

                   Title II--Subcontracting Integrity

    According to the SBA's Yearly Official Subcontracting 
Reports, small businesses receive more than $45 billion in 
Federal subcontracts each year. Unfortunately, Committee 
oversight revealed that subcontracting practices have been 
plagued with overstatements. According to GAO Report 05-459, 
numerous large contractors have overstated their small business 
subcontracting achievements--by as much as $30 million per 
contract, per year--at one Federal agency alone. The Committee 
strongly believes that greater compliance and oversight must be 
implemented government-wide to the fullest extent possible.
    In order to prevent misrepresentations in subcontracting, 
the bill provides that compliance by Federal prime contractors 
with small business subcontracting plans shall be evaluated as 
a percentage of obligated prime contract dollars, and also as, 
a percentage of subcontracts awarded, as recommended by the 
GAO.
    In addition to implementing GAO recommendations, the 
Committee largely re-adopted small business subcontracting 
provisions which were passed unanimously by the Senate in the 
108th, 109th and 110th Congresses. Small businesses testified 
before the Committee this Congress and during the 108th, 109th 
and 110th Congresses that prime contractors baited them by 
using them to create competitive subcontracting plans, helping 
the prime contractor win a contract, only to have the prime 
contractor switch and not follow through with its 
subcontracting plan commitments once the contract was awarded. 
As a result, the Committee believes more aggressive action is 
needed to increase the small business subcontracting share of 
Federal prime contracts. Therefore, the bill makes several 
changes to the Small Business Act intended to hold prime 
contractors responsible for the validity of subcontracting data 
and impose penalties for false certifications of past 
compliance with small business subcontracting.
    To prevent prime contractors from taking advantage of small 
business subcontractors through bait-and-switch fraud, the bill 
requires large prime contractors to certify that they will use 
small business subcontractors in the amount and quality used in 
preparing their winning bid or proposal, unless such firms no 
longer are in business or can no longer meet the quality, 
quantity or delivery date. The Committee expects that Federal 
agencies will use all appropriate legal and contractual 
remedies to deter, punish, and recover the proceeds of such 
fraud.

                     Title III--Acquisition Process

    The bill improves small business participation in the 
acquisition process. The bill also authorizes small business 
set-asides in multiple award multi-agency contracting vehicles 
in order to correct the very mixed record of small business 
participation in such contracts. These contract types were 
intended to reduce the administrative costs of contracting by 
reducing both the number of businesses and the types of terms 
and conditions which had to be completed for each task or 
delivery order. Under such contracts, the government negotiates 
an up-front agreement on future price discounts and delivery 
terms, but no actual work is performed or paid for until task 
and delivery orders are issued. In many instances, small 
businesses have had trouble securing business through the 
multiple-award contract system. For example, within the GSA 
Federal Supply Schedules (FSS or Schedules), small businesses 
represented about 80.8 percent of Schedule holders, but only 
37.33 percent of Schedule sales dollars in FY 2007.
    The Small Business Act and the Federal Acquisition 
Regulation require Federal agencies to set contracts aside for 
small businesses if there is a reasonable expectation that two 
or more small businesses would submit bids at reasonable 
prices. However, these general set-aside requirements have been 
interpreted not to apply to multiple-award contracts. The bill, 
by authorizing small business set-asides in multiple-award 
contracts, provides clear direction to contracting officers.
    The Committee believes that accountability of procurement 
personnel is essential to increasing the number of contracts 
that go to small businesses. This bill adds the meeting of 
small business procurement goals as a performance evaluation 
for key procurement personnel within the federal government.
    Finally, the Committee believes that it is time to end the 
Small Business Competitiveness Demonstration Program. 
Accordingly, this legislation repeals this program.

           Title IV--Small Business Size and Status Integrity

    In fiscal year 2007, the SBA announced that the Federal 
government missed its 23 percent contracting goal by .992 
percent. These numbers were even worse the next fiscal year. In 
fiscal year 2008, the SBA reported that the Federal Government 
missed its goal by 1.51 percent. Further, reports from the GAO 
and the SBA Office of Advocacy, along with independent analysis 
presented to the Committee, indicate that these numbers are 
probably much worse due to many large corporations self 
classifying as small businesses for contracting purposes.
    Hearings before the Committee established that fraud, 
regulatory loopholes and delays, and poor training in small 
business laws and regulations contribute to the problem. 
Recently, the SBA IG and the Department of Justice achieved a 
$1 million settlement with a large corporation that advertised 
itself as a small business for 10 years. However, prosecutions 
of companies that misrepresent their small business size and 
status have been rare.
    Under current law, the government has difficulty proving 
loss when the fraud was in the inducement to receive a contract 
and not in performance of the contract. The SBA IG testified 
that such cases still involve both the societal loss and the 
programmatic loss to the Federal government. To solve this 
problem, the bill creates an irrefutable statutory presumption 
that small business size or status fraud constitutes a loss to 
the government of contracting dollars diverted to large firms 
on a dollar-for-dollar basis. The Committee intends that this 
presumption shall be applied in all manner of criminal, civil, 
administrative, contractual, common law, or other actions, 
which the United States government may take to redress such 
fraud and misrepresentation.
    In CMS Information Services, Inc. (2002), the GAO confirmed 
that Federal agencies may properly require certification of 
small business size during the submission of quotations for 
procurements reserved for small business concerns. Similar to 
Federal Supply Schedules at issue in the CMS case, S. 2989 
requires certification of small business status at the time 
businesses submit their quotations on task orders on 
interagency or government-wide multiple award contracts. The 
SBA reached a similar conclusion in Size Appeal of SETA 
Corporation and Federal Emergency Management Agency, SBA No. 
SIZ-4477 (2002). The Committee realizes that unforeseen 
situations may arise and intends for the SBA to fully exercise 
its discretion.
    With regard to task orders on interagency multiple-award 
contracts, the Committee intends for the SBA, in consultation 
with relevant Federal agencies, to develop policies on 
appropriate certification requirements that would take into 
account and balance the varying features of such contracts, the 
impact of potential ramp-offs on small business contracting 
opportunities at the affected agencies, and the need for 
integrity and adequate disclosure of the actual small business 
participation. With regard to multiple-award contracts used for 
intra-agency purposes only, the Committee similarly expects the 
SBA to exercise its discretion.
    The Committee expects that the SBA's discretion will be 
consistent with the existing legal principle that company size 
is determined at the time of award based on the company's 
initial offer. Additionally, the SBA should ensure that 
reporting on small business participation shall accurately 
reflect all cases where a contract previously awarded to a 
small business concern or a small business concern itself has 
been negated to an entity other than a small business concern 
through merger, acquisition, divestiture, or otherwise.
    The SBA IG testified before the Committee in the 109th 
Congress that annual certification of small business size or 
status is the most effective measure of ensuring integrity of 
small business contracts.
    The Committee agrees with this view. The bill provides for 
annual certifications of small business size and status and 
that small business size or status shall be determined, as part 
of a company's responsibility, at the time of the award of a 
task order.
    The Committee has heard from many small businesses that 
Federal officials often lack training in small business laws 
and regulations. The bill directs development of such training 
courses, and also mandates a policy on prosecutions of small 
business size and status fraud.
    The Committee has heard testimony that the current size 
standards are in dire need of a comprehensive update. With the 
increase in large federal contract requirements, small 
businesses are being squeezed out of the federal marketplace. 
One way to increase small business viability is to allow small 
businesses to increase their capacity by increasing small 
business size standards. The Committee believes that a 
reasonable increase in small business size standards is 
warranted in order to allow small businesses to compete in the 
current federal marketplace.
    Under current procurement rules, a contracting officer 
designates a primary industry category for each contract, and 
the bidding firm must qualify as a small business under the 
size standard for that industry category to be given the 
contract as a small business. Examples of SBA general size 
standards include the following:
          (1) Manufacturing: maximum number of employees may 
        range from 500 to 1500, depending on the type of 
        product manufactured;
          (2) Wholesaling: maximum number of employees may 
        range from 100 to 500 depending on the particular 
        product being provided;
          (3) Services: annual receipts may not exceed $2.5 to 
        $21.5 million, depending on the particular service 
        being provided;
          (4) Retailing: annual receipts may not exceed $5.0 to 
        $21.0 million, depending on the particular product 
        being provided;
          (5) General and heavy construction: general 
        construction annual receipts may not exceed $13.5 to 
        $17 million, depending on the type of construction;
          (6) Special trade construction: annual receipts may 
        not exceed $7 million;
          (7) Agriculture: annual receipts may not exceed $0.5 
        to $9.0 million, depending on the agricultural product; 
        and
          (8) Small innovative companies participating in the 
        Small Business Innovation Research and the Small 
        Business Technology Transfer Programs: maximum number 
        of employees may not exceed 500, including affiliates.
    The Committee also believes that a comprehensive review of 
mentor-protege programs is appropriate and provides for that 
review as a part of this bill.

                          III. COMMITTEE VOTE

    In compliance with rule XXVI(7)(b) of the Standing Rules of 
the Senate, the following votes were recorded on March 4, 2010.
    A motion by Chair Landrieu to adopt a manger's package in 
the nature of a substitute, was approved by a unanimous voice 
vote.
    A second motion by the Chair, to adopt the Small Business 
Contracting Revitalization Act of 2010, to improve the Small 
Business Act and for other purposes, as amended by the 
manager's amendment, was also approved by a unanimous vote.

                           IV. COST ESTIMATE

    In compliance with rule XXVI(11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office.

                                                      June 1, 2010.
Hon. Mary L. Landrieu,
Chair, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Madam Chair: The Congressional Budget Office has 
prepared the enclosed revised cost estimate for S. 2989, the 
Small Business Contracting Revitalization Act of 2010, which 
supersedes an earlier estimate for S. 2989 that was transmitted 
on March 25, 2010. This revised estimate corrects an error in 
total estimated authorization levels; CBO's estimate of 
expenditures (budget outlays) from implementing the legislation 
remains unchanged.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 2989--Small Business Contracting Revitalization Act of 2010

    Summary: S. 2989 would amend laws that encourage federal 
agencies to award contracts for goods and services to small 
businesses. In particular, the bill would make changes to the 
practice of contract consolidation (combining two or more 
contracts into a single agreement) and to federal policies that 
relate to contract set-asides for small businesses. The bill 
also would authorize a grant program to encourage teams of 
small businesses to bid on government contracts.
    Based on information from the Small Business Administration 
(SBA) and other agencies with large procurement budgets, CBO 
estimates that implementing S. 2989 would cost $422 million 
over the 2011-2015 period, assuming appropriation of the 
necessary amounts.
    The bill could also affect direct spending by agencies not 
funded through annual appropriations, such as the Tennessee 
Valley Authority and the Bonneville Power Administration; 
therefore, pay-as-you-go procedures would apply. CBO estimates, 
however, that any net increase in annual spending by those 
agencies would not be significant. Enacting the legislation 
would not affect revenues.
    S. 2989 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 2989 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit) and all other budget functions 
that include spending to procure goods and services.

----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                              --------------------------------------------------
                                                                2011    2012    2013    2014    2015   2011-2015
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Administration of Governmentwide Procurement:
    Estimated Authorization Level............................      50      75      90     100     110       425
    Estimated Outlays........................................      30      60      90     100     110       390
Grants to Develop Small Business Teams:
    Authorization Level......................................       5       5       5       5       5        25
    Estimated Outlays........................................       3       4       4       5       5        21
SBA Administrative Costs:
    Estimated Authorization Level............................       3       3       3       1       1        11
    Estimated Outlays........................................       2       3       3       1       1        10
Reports:
    Estimated Authorization Level............................       1       0       0       *       0         1
    Estimated Outlays........................................       1       0       0       *       0         1
Total Changes:
    Estimated Authorization Level............................      59      83      98     106     116       462
    Estimated Outlays........................................      36      67      97     106     116      422
----------------------------------------------------------------------------------------------------------------
Note.--* = less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the end of fiscal year 2010 that the 
necessary amounts will be appropriated each year, and that 
spending will follow historical patterns for procurement 
activities. CBO estimates that implementing S. 2989 would cost 
$422 million over the 2011-2015 period.

Administration of governmentwide procurement

    S. 2989 is aimed at expanding the access of small 
businesses to federal contracts, in part by regulating contract 
bundling and contract consolidation (the practice of combining 
two or more contracts into a large single agreement). Under the 
bill, federal agencies would have to justify the use of 
consolidated contracts by evaluating whether such contracts are 
necessary and analyzing the effect on small businesses. In 
addition, the legislation would change federal regulations 
related to contract set-asides for small businesses. The 
legislation also would increase responsibilities for contract 
oversight as well as training requirements for federal agencies 
to help them meet goals for increasing procurement contracts 
with small businesses.
    The federal government purchases about $500 billion worth 
of goods and services each year, from office supplies to parts 
for aircraft carriers. CBO estimates that over 30,000 federal 
employees are responsible for administering the procurement of 
goods and services for the government at a cost of about $3 
billion annually. Based on information from SBA, the General 
Services Administration, and agencies with the most procurement 
spending, CBO expects that agencies would incur additional 
discretionary costs to comply with the bill's requirements to 
justify consolidated contracts, increase the number of 
contracts set aside for small businesses, and to identify small 
business concerns that are able to provide desired goods and 
services.
    Based on the current costs to administer contracts and the 
size and characteristics of those contracts, and assuming 
appropriation of the estimated amounts, CBO estimates that 
complying with administrative requirements in S. 2989 would 
cost federal agencies an average of about $80 million annually 
over the next five years--less than 3 percent of the amount CBO 
estimates is currently spent each year to administer the 
government's procurement efforts.

Grants to develop small business teams

    S. 2989 would establish a pilot program to assemble teams 
of small businesses that could compete for larger procurement 
contracts. The bill would require SBA to create a Center for 
Small Business Teaming and authorize the appropriation of $5 
million annually to make grants to eligible entities that would 
assemble the small-business teams. Based on information from 
SBA, CBO estimates that implementing this provision would cost 
$21 million over the 2011-2015 period, assuming appropriation 
of the specified amounts.

SBA administrative costs

    Based on information from SBA, CBO estimates that the 
agency would incur costs to meet additional administrative 
requirements that arise from changes made by the bill, 
including establishing the Center for Small Business Teaming 
and developing an electronic process to monitor procurement 
activities. CBO estimates that those additional costs would 
total about $10 million over the 2011-2015 period, assuming 
appropriation of the necessary amounts. Those costs include 
salaries and benefits for five full-time staff to operate the 
center.

Reports

    Finally, the bill would require a number of reports to the 
Congress from SBA, the Government Accountability Office (GAO), 
and federal agencies with procurement and contracting 
activities. GAO would be required to report on the usefulness 
of SBA's mentor-protege program and the results of a study of 
an SBA program to monitor procurement activities. Based on 
information from SBA and the costs of similar reports, CBO 
estimates that implementing the reporting provisions of S. 2989 
would cost $1 million over the 2011-2015 period.

Governmentwide procurement

    CBO expects that agencies would continue to encourage the 
use of small businesses to procure goods and services and would 
seek to meet the goals for such contracts as set out in the 
legislation. CBO expects that agencies also would continue to 
purchase goods and services at the lowest price available and 
that the goals for small business contracting would be met to 
the extent that doing so would not significantly increase 
procurement costs. Thus, we estimate that implementing the bill 
would not result in a significant change in acquisition costs.
    Pay-As-You-Go Consideration: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. S. 2989 could affect direct spending by agencies not 
funded through annual appropriations, such as the Tennessee 
Valley Authority and the Bonneville Power Administration; 
therefore, pay-as-you-go procedures would apply. CBO estimates, 
however, that any net increase in annual spending by those 
agencies would not be significant and enacting the legislation 
would not affect revenues. The net budgetary changes that are 
subject to pay-as-you-go procedures are shown in the following 
table.

     CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 2989, THE SMALL BUSINESS CONTRACTING REVITALIZATION ACT OF 2010, AS ORDERED REPORTED BY THE SENATE
                                            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP ON MARCH 4, 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2010   2011   2012   2013   2014   2015   2016   2017   2018   2019   2020  2010-2015  2010-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact.......................      0      0      0      0      0      0      0      0      0      0      0         0          0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: S. 2989 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Previous CBO estimate: On March 25, 2010, CBO transmitted a 
cost estimate for S. 2989, the Small Business Contracting 
Revitalization Act of 2010. That estimate incorrectly presented 
total estimated authorization levels for the bill; those 
amounts are corrected in this estimate. CBO's estimate of total 
expenditures (budget outlays) from implementing the legislation 
remains unchanged from the earlier estimate.
    Estimate prepared by: Federal Costs: Susan Willie and 
Matthew Pickford; Impact on State, Local, and Tribal 
Governments: Elizabeth Cove Delisle; Impact on the Private 
Sector: Samuel Wice.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                   V. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI(11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                    VI. SECTION-BY-SECTION ANALYSIS


Section 1. Short title

Section 2. Table of contents

Section 3. Definitions

                       TITLE I--CONTRACT BUNDLING

Sec. 101. Leadership and oversight

    This provision requires each agency to solicit bids from 
small business joint ventures and teams on each solicitation 
above the substantial bundling threshold. Further, the 
provision requires each agency to report on its efforts to 
reduce bundling.
    In addition, the provision requires agencies to post their 
anti-bundling policies on their websites as well as a list of 
all bundled contracts and the rationale for bundling. Last, the 
provision requires a study of the effectiveness of SBA 
Procurement Center Representatives (PCRs) and Commercial Market 
Representatives (CMRs).

Sec. 102. Consolidation of contract requirements

    This section requires that the head of each Federal 
department or agency ensures that the decisions made by that 
department or agency regarding consolidation of contract 
requirements are made with a view to providing small businesses 
with appropriate opportunities to participate as prime 
contractors and subcontractors.

Sec. 103. Small business teams pilot program

    This section creates a Center for Small Business Teaming. 
The purpose of the Center is to provide technical assistance 
through competitive grants with well-established national small 
business organizations to small businesses that want to team or 
joint venture. The goal is to allow more small businesses to 
compete for bundled contracts as teams or joint ventures.

                   TITLE II--SUBCONTRACTING INTEGRITY

Sec. 201. GAO recommendations on subcontracting misrepresentations

    This section is designed to prevent misrepresentations in 
subcontracting by implementing government-wide the Comptroller 
General's recommendations on subcontracting integrity. 
Specifically, compliance of Federal prime contractors with 
small business subcontracting plans shall be evaluated as a 
percentage of obligated prime contract dollars, and also a 
percentage of subcontracts awarded. Further, not later than 180 
days from the date of enactment of this Act, the head of each 
Federal agency shall issue a policy on small business 
subcontracting compliance.

Sec. 202. Small business subcontracting improvements

    This section requires prime contractors to acquire 
articles, equipment, supplies, services, or materials, or 
obtain the performance of construction work from small business 
concerns in the amount and quality used in preparing the bid or 
proposal, unless such small business concerns are no longer in 
business or can no longer meet the quality, quantity, or 
delivery date.

                     TITLE III--ACQUISITION PROCESS

Sec. 301. Reservation of prime contract awards for small businesses

    This provision requires that within 180 days of enactment, 
each agency head establish contracting criteria for their 
agency that: (1) sets aside part of multiple awards contracts 
for small businesses; (2) sets aside multiple awards contracts 
for subcategories of small businesses; and (3) reserve one or 
more contracts for small businesses and subcategories of small 
businesses for multiple full and open awards.

Sec. 302. Micro-purchase guidelines

    Within 180 days, the director of the Office of Management 
and Budget shall issue guidelines for the use of purchase cards 
to measure the participation of small business in government 
micro purchases. These guidelines shall be consistent with 
existing national policy on small business participation in 
micro purchase credit purchases.

Sec. 303. Agency accountability

    This provision requires the senior personnel of each agency 
to communicate to the agency's subordinates the importance of 
meeting small business goals. Further, this provision requires 
that each program manager and procurement professional have as 
a significant factor in their annual evaluation whether they 
have met their obligation to utilize small businesses.

Sec. 304. Payment of subcontractors

    This provision requires prime contractors to notify the 
contracting officer whenever they reduce payment to a 
subcontractor or where they are more than 90 days delinquent 
paying subcontractors where the prime contractor has been paid 
for the covered service by the federal agency or where the 
prime contractor has submitted a request for payment to the 
federal agency. Additionally, a contracting officer shall 
consider failure to pay subcontractors in a timely manner when 
evaluating past performance of the subject contractor. Further, 
a contracting officer may require a contractor with a history 
of untimely payments to enter into a funds control agreement 
for the purposes of paying subcontractors in a timely manner.

Sec. 305 Repeal of small business competitiveness demonstration program

    This provision repeals the small business competitiveness 
demonstration program.

           TITLE IV--SMALL BUSINESS SIZE AND STATUS INTEGRITY

Sec. 401. Policy and presumptions

    The provision contains an irrefutable presumption of a 
dollar-for-dollar loss to the United States in every contract, 
subcontract, cooperative agreement, cooperative R & D 
agreement, or grant reserved for small business concerns which 
is obtained by misrepresentation of small business size or 
status. The provision also establishes that submissions of bids 
or proposals on contracts, agreements, or grants reserved for 
small business, or registrations in Federal databases to be 
considered as a small business concern, constitutes an 
affirmative certification of small business size or status. 
Finally, the provision requires that every contract or grant 
solicitation contain a place for certification of small 
business size or status by a high-level corporate official of 
the contractor. The provision allows the SBA Administrator to 
issue ``safe harbor'' regulations to protect contractors from 
liability for unintentional errors and technical glitches.

Sec. 402. Annual certification

    This provision requires annual certification of small 
business size or status on the SBA's CCR database or any 
successor database. The provision also clarified the timing of 
determination of small business size and status. Specifically, 
small business size or status shall be determined at the time 
of award of a Federal contract, subcontract, or other funding 
instrument. For interagency multiple-award contracts, small 
business size and status will be determined at the time of the 
award of the contract and also at the time of the award of each 
task or delivery order reserved for a small business.

Sec. 403. Training for contracting and enforcement personnel

    This provision directs the SBA, together with other 
agencies, to develop training on small business size standards. 
The provision also directs the SBA IG and heads of other 
agencies to issue a policy on prosecutions of size standards or 
status fraud.

Sec. 404. Updated size standards

    This section requires the SBA to conduct a detailed review 
of the size standards for small businesses not later than one 
year after enactment, and if the SBA deems it appropriate, the 
provision directs the SBA to publish revised size standards. 
This section also requires the SBA to make public the factors 
evaluated and criteria used in its size standard review.

Sec. 405. Study and report on the mentor-protege program

    This provision requires GAO to study the effectiveness of 
the mentor-protege program. The GAO is required to evaluate 
whether the program has been an effective tool for protege 
development and not a tool whereby mentors qualify themselves 
for small business contracts with little or no benefit to the 
protege firm.

                                  
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