H.R. 3994 (104th): Entrepreneur Development Program Act of 1996

104th Congress, 1995–1996. Text as of Aug 02, 1996 (Introduced).

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HR 3994 IH

104th CONGRESS

2d Session

H. R. 3994

To amend the Small Business Act to provide comprehensive and structured business development assistance to emerging small business concerns owned by economically disadvantaged individuals to foster their entrepreneurial potential and marketplace success, without relying on preferential award of Government contracts, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

August 2, 1996

Mrs. MEYERS of Kansas introduced the following bill; which was referred to the Committee on Small Business


A BILL

To amend the Small Business Act to provide comprehensive and structured business development assistance to emerging small business concerns owned by economically disadvantaged individuals to foster their entrepreneurial potential and marketplace success, without relying on preferential award of Government contracts, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Entrepreneur Development Program Act of 1996’.

SEC. 2. ENTREPRENEUR DEVELOPMENT PROGRAM.

    Section 7(j) of the Small Business Act (15 U.S.C. 636(j)) is amended to read as follows:

    ‘SEC. 7(j) ENTREPRENEUR DEVELOPMENT PROGRAM-

      ‘(1) PROGRAM ESTABLISHED- There is established within the Administration an Entrepreneur Development Program (hereinafter referred to as the ‘Program’). The Program shall provide comprehensive and structured business development assistance to foster the entrepreneurial potential of emerging small business concerns owned and controlled by eligible individuals. The Program shall be managed by an Associate Administrator under the supervision of, and responsible to, the Administrator.

      ‘(2) ELIGIBILITY-

        ‘(A) IN GENERAL- The Program established by paragraph (1) shall be available exclusively to emerging small business concerns owned and controlled by eligible individuals, whose status as such has been certified by the Administration.

        ‘(B) PROGRAM PARTICIPANT- The term ‘Program Participant’ means an emerging small business concern, meeting the requirements of subparagraph (C), which

          ‘(i) is at least 51 percent unconditionally owned by

            ‘(I) one or more eligible individuals,

            ‘(II) an Indian tribe (or a wholly owned business entity of such tribe), or

            ‘(III) a Native Hawaiian organization, or

          ‘(ii) in the case of any publicly-owned business, at least 51 percent of the stock of such concern is unconditionally owned by

            ‘(I) one or more eligible individuals,

            ‘(II) an Indian tribe (or a wholly owned business entity of such tribe), or

            ‘(III) a Native Hawaiian organization.

        ‘(C) CONTROL OF DAILY BUSINESS OPERATIONS- A concern meets the requirements of this subparagraph if the management and daily business operations of such concern are controlled by one or more eligible individuals, an Indian tribe, or a Native Hawaiian organization.

        ‘(D) EMERGING SMALL BUSINESS CONCERN- For the purposes of this subsection, the term emerging small business concern means a small business concern the size of which is less than or equal to 25 percent of the numerical size standard for the standard industrial classification that encompasses the principal line of business of such concern.

        ‘(E) ELIGIBLE INDIVIDUAL- For participation in the program, an individual must not have a net worth in excess of $250,000, excluding from such computation the value of the person’s investment in the emerging small business concern that will participate in the Program.

      ‘(3) OUTREACH FOR PROGRAM PARTICIPANTS- The Administration shall develop and implement an outreach program to inform and recruit eligible concerns to apply for the Program. Such outreach program shall make a sustained and substantial effort to solicit Program applications from small business concerns located within States having relatively few Program Participants.

      ‘(4) DETERMINATIONS OF INDIVIDUAL ELIGIBILITY-

        ‘(A) DIVISION OF PROGRAM CERTIFICATION AND ELIGIBILITY ESTABLISHED- There is established a Division of Program Certification and Eligibility (hereinafter referred to as the ‘Division’). The Division shall be headed by a Director who shall report to the Associate Administrator responsible for the Program.

        ‘(B) RESPONSIBILITIES OF THE DIVISION- The responsibilities of the Division are to--

          ‘(i) receive, review, and evaluate applications for certification as a Program Participant pursuant to the eligibility criteria in paragraph (2);

          ‘(ii) advise each Program applicant within 15 days after the receipt of an application as to whether such application is complete and suitable for evaluation and, if not, what matters must be rectified;

          ‘(iii) render recommendations on such applications to the Associate Administrator for the Program;

          ‘(iv) review and evaluate financial statements and other submissions from Program Participants;

          ‘(v) make requests for the initiation of termination or graduation proceedings, as appropriate, to the Associate Administrator;

          ‘(vi) make recommendations to the Associate Administrator concerning requests for reconsideration or challenges from applicants that have been denied program admission; and

          ‘(vii) decide protests regarding the current eligibility a Program Participant for continued Program participation.

        ‘(C) DEADLINE FOR ACTION ON PROGRAM APPLICATIONS- Not later than 90 days after receipt of a completed application for Program certification, the Associate Administrator for the Program shall certify a small business concern as a Program Participant or shall deny such application.

        ‘(D) ADDITIONAL LIMITATIONS ON PROGRAM ELIGIBILITY-

          ‘(i) Except for an Indian tribe or a Native Hawaiian organization, no individual upon whom the eligibility of a firm which graduated from the Minority Small Business and Capital Ownership Development Program before the effective date of this subsection shall be eligible to assert such status with respect to any other business concern making application for the Program certification after such effective date.

          ‘(ii) Except in the case of an Indian tribe or a Native Hawaiian organization, an individual upon whom eligibility is based pursuant to paragraph (2) shall be permitted to assert such Program eligibility for only one small business concern.

          ‘(iii) No concern shall be subsequently recertified for Program participation if its prior Program participation was concluded for any of the reasons described in paragraph (9).

      ‘(5) DURATION OF PARTICIPATION- The term of participation in the Program shall be five years from the date of certification as a Program Participant.

      ‘(6) BUSINESS PLANNING-

        ‘(A) PLAN REQUIRED- Each concern making application to the Program and each Program Participant shall submit to the Administration a business plan (referred to as the ‘business plan’), addressing the matters described in subparagraph (B).

        ‘(B) CONTENTS OF THE BUSINESS PLAN- For the purposes of subparagraph (A), a business plan shall include the following:

          ‘(i) An analysis of market potential, competitive environment, and other business analyses estimating the firm’s prospects for profitable operations during its Program participation term and after graduation.

          ‘(ii) An analysis of the firm’s business strengths and weaknesses with particular attention to correcting any financial, managerial, technical, or personnel weaknesses which are likely to impede the business development of the firm.

          ‘(iii) Specific targets, objectives, and goals for the firms business development during the next year and each succeeding year of its Program participation term and three years after exiting the Program, utilizing the results of the analyses conducted pursuant to clauses (i) and (ii).

          ‘(iv) Continuous attention regarding the Program Participant’s successful transition to sustainable business operations after exiting the Program.

        ‘(C) MAINTAINING A CURRENT BUSINESS PLAN- Each Program Participant shall annually review its currently approved plan with its Business Opportunity Specialist and modify such plan as may be appropriate. Any modified plan shall be submitted to the Administration for approval. The currently approved plan shall be considered valid until such time as a modified plan is approved.

      ‘(7) FORMS OF ASSISTANCE-

        ‘(A) IN GENERAL- The assistance provided to a Program Participant may include--

          ‘(i) developing and maintaining the Program Participant’s business plan;

          ‘(ii) providing access to training and assistance in general business management (including, but not limited to, organizational management, financial management, personnel management, marketing, and proposal development);

          ‘(iii) facilitating access to debt financing through guaranteed loans made pursuant to section 7(a) and other means;

          ‘(iv) facilitating access to equity financing through the Small Business Investment Company Program and other means; and

          ‘(v) facilitating access to adequate surety bonding through the surety bond guarantee programs authorized by part B of title IV of the Small Business Investment Act of 1958.

        ‘(B) USE OF PRIVATE SECTOR PARTNERS-

          ‘(i) The Administration may provide financial assistance to public or private organizations to undertake the activities described in paragraph (A).

          ‘(ii) Such financial assistance may be provided through contract, grant or cooperative agreement, as may be appropriate.

          ‘(iii) The Administration is authorized to make payments under contracts, grants, or cooperative agreements entered into under this paragraph in lump sum or installments, in advance or by way of reimbursement, making any necessary adjustments for overpayments or underpayments.

      ‘(8) VERIFICATION OF INDIVIDUAL ELIGIBILITY-

        ‘(A) ANNUAL CERTIFICATION OF OWNERSHIP AND CONTROL- Each Program Participant shall certify, on an annual basis, that it meets the requirements of paragraph (2)(C) regarding ownership and control.

        ‘(B) ANNUAL FINANCIAL STATEMENT- Each Program Participant shall annually submit to the Administration such information as may be necessary for the Administration to make a determination of continued eligibility for Program participation, including a personal financial statement from each owner.

        ‘(C) PROMPT NOTIFICATION OF CHANGE OF OWNERSHIP REQUIRED- A Program Participant shall notify the Administrator immediately upon entering an agreement (either oral or in writing) to transfer all or part of its stock or other ownership interest to any other party.

        ‘(D) SPECIAL RULE FOR TRANSFERS TO SMALL BUSINESS INVESTMENT COMPANIES- For the purposes of determining ownership and control of a Program Participant, any potential ownership interests held by investment companies licensed under the Small Business Investment Act of 1958 shall be treated in the same manner as interests held by the individuals upon whom Program eligibility is based.

        ‘(E) STATUS REVIEW-

          ‘(i) Whenever the Administration has reason to believe, based upon specific and credible information, that a Program Participant no longer meets the requirements for the Program, the Administration shall conduct a review, and if appropriate, take remedial action.

          ‘(ii) If the Administration determines, pursuant to such review, that a Program Participant (other than an Indian tribe or a Native Hawaiian Organization) or its owners are no longer eligible, a termination proceeding shall be commenced.

      ‘(9) TERMINATION OF PARTICIPATION-

        ‘(A) IN GENERAL- A Program Participant shall cease to be a Program Participant, if such firm--

          ‘(i) voluntarily elects not to continue Program participation;

          ‘(ii) completes its term of Program participation;

          ‘(iii) is terminated from Program participation pursuant to a termination proceeding; or

          ‘(iv) is graduated pursuant to a graduation proceeding.

        ‘(B) TERMINATION-

          ‘(i) DEFINITION- For the purposes of this subsection, the term ‘termination’ (or ‘terminated’) means the total denial or suspension of Program participation prior to the Program Participant exiting the Program due to graduation or the expiration of its Program Participation term.

          ‘(ii) GROUNDS FOR TERMINATION- An action for termination shall be based upon good cause as specified in implementing regulation, and shall include--

            ‘(I) failure of the Program Participant to maintain its eligibility for Program participation;

            ‘(II) a demonstrated pattern of failing to make required submissions or responses to the Administration in a timely manner; or

            ‘(III) willful violation of any rule or regulation of the Administration pertaining to material issues relating to Program participation.

          ‘(iii) TERMINATION PROCEEDING- Whenever the Administration determines to initiate a termination proceeding, within 15 days after making such a determination, the Program Participant shall be provided a written notice of intent to terminate, specifying the reasons for such action. No Program Participant shall be terminated without first being afforded an opportunity for a hearing on the record, in

accordance with chapter 5 of title 5, United States Code.

        ‘(C) GRADUATION-

          ‘(i) DEFINITION- For the purposes of this subsection, the term ‘graduation’ (or ‘graduated’) means that the Program Participant is recognized as successfully completing the Program by substantially achieving the targets, objectives, and goals contained in its business plan, or otherwise demonstrating its ability to compete in the marketplace.

          ‘(ii) GRADUATION PROCEEDING- Whenever the Administration determines to initiate a graduation proceeding with which the Program Participant does not concur, within 15 days after making such determination, the Program Participant shall be provided a written notice of the Administration’s intent to involuntarily graduate the concern, specifying the reasons for such determination. No Program Participant shall be involuntarily graduated without first being offered an opportunity for a hearing on the record, in accordance with chapter 5 of title 5, United States Code.

      ‘(10) PROGRAM MANAGEMENT-

        ‘(A) MANAGEMENT INFORMATION SYSTEM- The Administrator shall develop and implement a process for the systematic collection of data on the operations of the Program, monitoring regularly the effectiveness of the assistance being provided to each Program Participant.

        ‘(B) ANNUAL REPORT TO CONGRESS-

          ‘(i) REPORT REQUIRED- Not later than April 30 of each year, the Administrator shall submit a report to the Congress on the Program regarding the effectiveness of the Program in fostering the entrepreneurial development of Program Participants.

          ‘(ii) CONTENTS OF THE REPORT- In addition to such performance measures as the Administrator deems appropriate, the report shall include the following--

            ‘(I) The average personal net worth of individuals who own and control concerns that were initially certified for participation in the Program during the immediately preceding fiscal year.

            ‘(II) A compilation and evaluation of those business concerns that have exited the Program during the immediately preceding three fiscal years. Such compilation and evaluation shall detail the number of concerns actively engaged in business operations, those that have ceased or substantially curtailed such operations (including the reasons for such actions), and those concerns that have been acquired by other business concerns or entities.

            ‘(III) A listing of all participants in the Program during the preceding fiscal year identifying, by State and by Region, for each firm: the name of the concern, the race or ethnicity, and gender of the owners, gross receipts, number of employees, the dollar value of all contracts received in the preceding year, the dollar amount of advance payments received by each concern, and a description including (if appropriate) an estimate of the dollar value of all other assistance furnished under the Program during such year.

        ‘(C) The first report required by subparagraph (B) shall pertain to fiscal year 1997.

      ‘(11) PERSERVING PROGRAM INTEGRITY-

        ‘(A) IN GENERAL- No person within the employ of the Administration shall, during the term of such employment and for a period of two years after such employment has been terminated, engage in any activity or transaction specified in subparagraph (B) with respect to any Program Participant during such person’s term of employment, if such person participated personally (either directly or indirectly) in decisionmaking responsibilities relating to such Program Participant or with respect to the administration of any assistance provided to Program Participants generally under this subsection.

        ‘(B) PROHIBITED ACTIONS- The activities and transactions prohibited by subparagraph (A) include--

          ‘(i) the buying, selling, or receiving (except by inheritance) of any legal or beneficial ownership of stock or any other ownership interest or the right to acquire any such interest;

          ‘(ii) the entering into or execution of any written or oral agreement (whether or not legally enforceable) to purchase or otherwise obtain any right or interest described in clause (i); or

          ‘(iii) the receipt of any other benefit or right that may be an incident of ownership.

        ‘(D) PENALTIES- Any present or former employee of the Administration who violates this paragraph shall be subject to a civil penalty, assessed by the Attorney General, that shall not exceed 300 percent of the maximum amount of gain such employee realized or could have realized as a result of engaging in those activities and transactions prescribed by subparagraph (B).’

SEC. 3. ELIMINATION OF 8(a) CONTRACTING AUTHORITY.

    (a) REPEAL OF SECTION 8(A)- Section 8(a) of the Small Business Act (15 U.S.C. 637(a)) is amended to read as follows:

    ‘SEC. 8(a). [RESERVED].’

    (b) AUTHORITY TO PERFORM EXISTING 8(a) CONTRACTS- Subject to the provisions of Section 8(a) of the Small Business Act (15 U.S.C. 637(a)) as in effect on the day before the date of enactment of this Act, a contract (including options) awarded pursuant to that subsection may be performed by the concern awarded such contract.

    (c) DEFINITIONS- Section 3 of the Small Business Act (15 U.S.C. 632) is amended by adding the following new subsections:

    ‘(o) For the purposes of this Act, the term ‘Indian tribe’ means any band, nation, or other organized group or community of Indians, including any Alaska Native village or a regional or village corporation (within the meaning of the Alaska Native Claims Settlement Act) which is recognized as--

      ‘(1) eligible for the special programs and services provided by the United States to Indians because of their status as Indians, or

      ‘(2) an Indian tribe by the State in which such band, nation, group, or community resides.

    ‘(p) For the purposes of this Act, the term ‘Native Hawaiian Organization’ means any community service organization serving Native Hawaiians in the State of Hawaii, which--

      ‘(1) is a not-for-profit organization chartered by the State of Hawaii,

      ‘(2) is controlled by Native Hawaiians, and

      ‘(3) whose business activities will principally benefit Native Hawaiians.’.

    (d) STATUS PROTEST SYSTEM- Section 8(d) of the Small Business Act (15 U.S.C. 637(d)) is amended by adding at the end thereof a new paragraph (11), as follows:

      ‘(11)(A) A protest may be brought regarding a representation by a business concern regarding its status as small business concern owned and controlled by socially and economically disadvantaged individuals by

        ‘(i) another person with a direct economic interest in the award of the contract or subcontract under which such business has allegedly made the false representation regarding its status as a small business concern owned and controlled by socially and economically disadvantaged individuals;

        ‘(ii) a prime contractor receiving specific and credible information that an actual or prospective subcontractor or supplier has falsely represented its status as a small business concern owned and controlled by socially and economically disadvantaged individuals;

        ‘(iii) a contracting officer receiving a representation regarding an actual or prospective contractor’s status, which such officer believes to be false; or

        ‘(iv) the Administrator (or a designee of such officer).

      ‘(B) The Office of Hearings and Appeals shall hear appeals regarding the status of a concern as a small business concern owned and controlled by socially and economically disadvantaged individuals for the purposes of any program or activity conducted pursuant to this subject or any other Federal law that refers to this subsection for a description of program eligibility.

      ‘(C) A decision issued pursuant to subparagraph (B) shall--

        ‘(i) be made available to all parties to the proceeding;

        ‘(ii) be published in full text; and

        ‘(iii) include findings of fact and conclusions of law, with specific reasons supporting such findings and conclusions, on each material issue of fact and law of decisional significance regarding the disposition of the protest.

      ‘(D) A decision issued pursuant to subparagraph (B) shall be considered a final agency action, and shall be subject to judicial review under section 553 of title 5, United States Code.

      ‘(E) If a firm engages in a pattern of misrepresentations regarding the firm’s status in violation of section 16(d)(1), the Administration or the executive agency receiving such misrepresentations of status shall initiate an action to impose an appropriate sanction under section 16(d)(2).’.

      (4) SIZE DETERMINATIONS REGARDING TRIBALLY-OWNED CORPORATIONS- Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) is amended by adding at the end the following new paragraph:

      ‘(4) In determining the size of a business concern owned by an Indian tribe (or a wholly-owned business entity of such tribe), each firm’s size shall be independently determined without regard to its affiliation with the tribe, any entity of the tribal government, or any other business enterprise owned by the tribe, unless the Administrator determines that one or more such tribally-owned business concerns have obtained (or are likely to obtain) a substantial unfair competitive advantage within an industry category.’.

      (5) POLITICALLY MOTIVATED ACTIONS PROHIBITED- Section 4 of the Small Business Act (15 U.S.C. 633) is amended by adding at the end the following new subsection:

    ‘(g) POLITICALLY MOTIVATED ACTIONS PROHIBITED-

      ‘(1) IN GENERAL- Any employee of the Administration who has authority to take, direct others to take, recommend, or approve any action with respect to any program or activity conducted pursuant to this Act, shall not, with respect to any such action, exercise or threaten to exercise such authority on the basis of the political activity or affiliation of any party. Employees of the Administration shall expeditiously report to the Inspector General of the Administration any such action for which such employee’s participation has been solicited or directed.

      ‘(2) PENALTIES AUTHORIZED- Any employee who willfully and knowingly violates paragraph (1) shall be subject to disciplinary action, which may

consist of separation from service, reduction in grade, suspension, or reprimand.

      ‘(3) RULE OF CONSTRUCTION- Paragraph (1) shall not apply to any action taken as a penalty or other enforcement of a violation of any law, or regulation prohibiting or restricting political activity.

      ‘(4) SAVINGS PROVISION- The prohibitions of paragraph (1), and remedial measures provided for under paragraphs (2) and (3) with regard to such prohibitions, shall be in addition to, and not in lieu of, any other prohibitions, measures or liabilities that may arise under any other provision of law.’.

SEC. 4. PROCUREMENT FORECASTS.

    Section 15(d) of the Small Business Act (15 U.S.C. 644(d)) is amended to read as follows:

    ‘(d)(1) Each executive agency reporting to the Federal Procurement Data System contract actions with an aggregate value in excess of $50,000,000 in fiscal year 1995, or in any succeeding fiscal year, shall prepare a forecast of expected contract opportunities or classes of contract opportunities for the next and succeeding fiscal years that small business concerns, including those owned and controlled by women or socially and economically disadvantaged individuals, are capable of performing. Such forecast shall be periodically revised during such year.

    ‘(2) To the extent such information is available, the agency forecasts required by paragraph (1) shall specify--

      ‘(A) The approximate number of individual contract opportunities (and the number of opportunities within a class).

      ‘(B) The approximate dollar value, or range of dollar values, for each contract opportunity or class of contract opportunities.

      ‘(C) The anticipated time (by fiscal year quarter) for the issuance of a procurement request.

      ‘(D) The activity responsible for the award and administration of the contract.

    ‘(3) The head of such executive agency subject to the provisions of paragraph (1) shall, within 10 days of its completion, furnish such forecast (and any modification) to--

      ‘(A) the Director of the Office of Small and Disadvantaged Business Utilization established pursuant to section 15(k) for such agency; and

      ‘(B) the Administrator.

    ‘(4) The information reported pursuant to paragraph (1) may be limited to classes of items and services for which there are substantial annual purchases.

    ‘(5) Such forecasts shall be made available to any small business concerns upon request.’.

SEC. 5. NON-MANUFACTURER RULE.

    Section 15(f) of the Small Business Act (15 U.S.C. 644(f)) is amended to read as follows:

    ‘(f)(1) An otherwise responsible small business concern that is in compliance with the requirements of paragraph (2) shall not be denied the opportunity to submit and have considered its offer for any procurement contract for the supply of a product to be let pursuant to subsection (a) solely because such concern is other than the actual manufacturer or processor of the product to be supplied under the contract.

    ‘(2) To be in compliance with the requirements referred to in paragraph (1), such a business concern shall--

      ‘(A) be primarily engaged in the wholesale or retail trade;

      ‘(B) be a small business concern under the numerical size standard for the Standard Industrial Classification Code assigned to the contract solicitation on which the offer is being made;

      ‘(C) be a regular dealer, as defined pursuant to section 35(a) of title 41, United States Code (popularly referred to as the Walsh-Healey Public Contracts Act), in the product to be offered the Government; and

      ‘(D) represent that it will supply the product of a domestic small business manufacturer or processor, unless a waiver of such requirement is granted.

        ‘(i) by the Administrator, after reviewing a determination by the contracting officer that no small business manufacturer or processor can reasonably be expected to offer a product meeting the specifications (including period for performance) required of an offeror by the solicitation; or

        ‘(ii) by the Administrator for a product (or class of products), after determining that no small business manufacturer or processor is available to participate in the Federal procurement market.’.

SEC. 6. REFERENCES TO ADMINISTRATOR.

    In this Act, the term Administrator means Administrator of the Small Business Administration.