H.R. 3893 (112th): Subcontracting Transparency and Reliability Act of 2012

112th Congress, 2011–2013. Text as of Feb 02, 2012 (Reported by House Committee).

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IB

Union Calendar No. 534

112th CONGRESS

2d Session

H. R. 3893

[Report No. 112–731, Part I]

IN THE HOUSE OF REPRESENTATIVES

February 2, 2012

introduced the following bill; which was referred to the Committee on Small Business, and in addition to the Committee on Oversight and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

December 27, 2012

Additional sponsors: Mr. Hanna, Mr. Walsh of Illinois, Mr. Chabot, Mr. Graves of Missouri, Mr. West, Mr. Schilling, Mr. Tipton, Mrs. Ellmers, and Mr. Kingston

December 27, 2012

Reported from the Committee on Small Business with an amendment

Strike out all after the enacting clause and insert the part printed in italic

December 27, 2012

The Committee on Oversight and Government Reform discharged; committed to the Committee of the Whole House on the State of the Union and ordered to be printed

For text of introduced bill, see copy of bill as introduced on February 2, 2012


A BILL

To amend the Small Business Act with respect to subcontracting and insourcing, and for other purposes.


1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Subcontracting Transparency and Reliability Act of 2012.

(b)

Table of contents

Sec. 1. Short title; table of contents.

Title I—Limitations on subcontracting

Sec. 101. Limitations on subcontracting.

Sec. 102. Penalties.

Sec. 103. Conforming amendments.

Sec. 104. Guidance.

Title II—Subcontracting plans

Sec. 201. Subcontracting plans.

Sec. 202. Notices of subcontracting opportunities.

Title III—Insourcing

Sec. 301. Definitions relating to procurement protest system.

Sec. 302. Insourcing.

I

Limitations on subcontracting

101.

Limitations on subcontracting

The Small Business Act (15 U.S.C. 631 et seq.) is amended—

(1)

by redesignating section 45 as section 47; and

(2)

by inserting after section 44 the following:

45.

Limitations on subcontracting

(a)

In general

If awarded a contract under section 8(a), 8(m), 15(a), 31, or 36, a covered small business concern—

(1)

in the case of a contract for services, may not expend on subcontractors more than 50 percent of the amount paid to the concern under the contract;

(2)

in the case of a contract for supplies (other than from a regular dealer in such supplies), may not expend on subcontractors more than 50 percent of the amount, less the cost of materials, paid to the concern under the contract;

(3)

in the case of a contract described in more than 1 of paragraphs (1) through (4)—

(A)

shall determine for which category of services or supplies, described in 1 of paragraphs (1) through (4), the greatest percentage of the contract amount is awarded;

(B)

shall determine the amount awarded under the contract for that category of services or supplies; and

(C)

may not expend on subcontractors, with respect to the amount determined under subparagraph (B), more than—

(i)

50 percent of that amount, if the category of services or supplies applicable under subparagraph (A) is described in paragraph (1); and

(ii)

50 percent of that amount, if the category of services or supplies applicable under subparagraph (A) is described in paragraph (2); and

(4)

in the case of a contract for supplies from a regular dealer in such supplies, shall supply the product of a domestic small business manufacturer or processor, unless a waiver of such requirement is granted—

(A)

by the Administrator, after reviewing a determination by the applicable 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 by the contract; or

(B)

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.

(b)

Similarly situated entities

Contract amounts expended by a covered small business concern on a subcontractor that is a similarly situated entity shall not be considered subcontracted for purposes of determining whether the covered small business concern has violated a requirement established under subsection (a) or (d).

(c)

Modifications of percentages

(1)

In general

The Administrator may change, by rule (after providing notice and an opportunity for public comment), a percentage specified in paragraphs (1) through (4) of subsection (a) if the Administrator determines that such change is necessary to reflect conventional industry practices among business concerns that are below the numerical size standard for businesses in that industry category.

(2)

Uniformity

A change to a percentage under paragraph (1) shall apply to all covered small business concerns.

(d)

Other contracts

(1)

In general

With respect to a category of contracts to which a requirement under subsection (a) does not apply, the Administrator is authorized to establish, by rule (after providing notice and an opportunity for public comment), a requirement that a covered small business concern may not expend on subcontractors more than a specified percentage of the amount paid to the concern under a contract in that category.

(2)

Uniformity

A requirement established under paragraph (1) shall apply to all covered small business concerns.

(3)

Construction projects

The Administrator shall establish, through public rulemaking, requirements similar to those specified in paragraph (1) to be applicable to contracts for general and specialty construction and to contracts for any other industry category not otherwise subject to the requirements of such paragraph. The percentage applicable to any such requirement shall be determined in accordance with paragraph (2).

(e)

Definitions

In this section, the following definitions apply:

(1)

Covered small business concern

The term covered small business concern means a business concern that—

(A)

with respect to a contract awarded under section 8(a), is a small business concern eligible to receive contracts under that section;

(B)

with respect to a contract awarded under section 8(m)—

(i)

is a small business concern owned and controlled by women (as defined in that section); or

(ii)

is a small business concern owned and controlled by women (as defined in that section) that 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);

(C)

with respect to a contract awarded under section 15(a), is a small business concern;

(D)

with respect to a contract awarded under section 31, is a qualified HUBZone small business concern; or

(E)

with respect to a contract awarded under section 36, is a small business concern owned and controlled by service-disabled veterans.

(2)

Similarly situated entity

The term similarly situated entity means a subcontractor that—

(A)

if a subcontractor for a small business concern, is a small business concern;

(B)

if a subcontractor for a small business concern eligible to receive contracts under section 8(a), is such a concern;

(C)

if a subcontractor for a small business concern owned and controlled by women (as defined in section 8(m)), is such a concern;

(D)

if a subcontractor for a small business concern owned and controlled by women (as defined in section 8(m)) that 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), is such a concern;

(E)

if a subcontractor for a qualified HUBZone small business concern, is such a concern; or

(F)

if a subcontractor for a small business concern owned and controlled by service-disabled veterans, is such a concern.

.

102.

Penalties

Section 16 of the Small Business Act (15 U.S.C. 645) is amended by adding at the end the following:

(g)

Subcontracting limitations

(1)

In general

Whoever violates a requirement established under section 45 shall be subject to the penalties prescribed in subsection (d), except that, for an entity that exceeded a limitation on subcontracting under such section, the fine described in subsection (d)(2)(A) shall be treated as the greater of—

(A)

$500,000; or

(B)

the dollar amount expended, in excess of permitted levels, by the entity on subcontractors.

(2)

Monitoring

Not later than 1 year after the date of enactment of this subsection, the Administrator shall take such actions as are necessary to ensure that an existing Federal subcontracting reporting system is modified to notify the Administrator, the appropriate Director of the Office of Small and Disadvantaged Business Utilization, and the appropriate contracting officer if a requirement established under section 45 is violated.

.

103.

Conforming amendments

(a)

HUBZones

Section 3(p)(5) of the Small Business Act (15 U.S.C. 632(p)(5)) is amended—

(1)

in subparagraph (A)(i) by striking subclause (III) and inserting the following:

(III)

with respect to any subcontract entered into by the small business concern pursuant to a contract awarded to the small business concern under section 31, the small business concern will ensure that the requirements of section 45 are satisfied; and

;

(2)

by striking subparagraphs (B) and (C); and

(3)

by redesignating subparagraph (D) as subparagraph (B).

(b)

Entities eligible for contracts under section 8(a)

Section 8(a) of such Act (15 U.S.C. 637(a)) is amended by striking paragraph (14) and inserting the following:

(14)

Limitations on subcontracting

A concern may not be awarded a contract under this subsection as a small business concern unless the concern agrees to satisfy the requirements of section 45.

.

(c)

Small business concerns

Section 15 of such Act (15 U.S.C. 644) is amended by striking subsection (o) and inserting the following:

(o)

Limitations on subcontracting

A concern may not be awarded a contract under subsection (a) as a small business concern unless the concern agrees to satisfy the requirements of section 45.

.

104.

Regulations

Not later than 180 days after the date of enactment of this Act, the Administrator of the Small Business Administration shall issue guidance with respect to compliance with the changes made to the Small Business Act by the amendments in this Act, with opportunities for notice and comment.

II

Subcontracting plans

201.

Subcontracting plans

(a)

Subcontracting reporting requirements

(1)

In general

Section 8(d)(6) of the Small Business Act (15 U.S.C. 637(d)(6)) is amended—

(A)

by striking (6) Each subcontracting plan and inserting the following:

(6)

Subcontracting plan requirements

Each subcontracting plan

;

(B)

by amending subparagraph (E) to read as follows:

(E)

assurances that the offeror or bidder will—

(i)

submit—

(I)

not later than 180 days after the date on which performance under the applicable contract begins, and every 180 days thereafter until contract performance ends, a report that describes all subcontracting activities under the contract during the preceding 180-day period;

(II)

not later than 1 year after the date on which performance under the applicable contract begins, and annually thereafter until contract performance ends, a report that describes all subcontracting activities under the contract that have occurred before the date on which the report is submitted (except that, with respect to the Department of Defense and the National Aeronautics and Space Administration, a report under this subclause shall be submitted not later than 180 days after the date on which contract performance begins and every 180 days thereafter until contract performance ends); and

(III)

not later than 30 days after the date on which performance under the applicable contract ends, a report that describes all subcontracting activities under the contract; and

(ii)

cooperate with any study or survey required by the applicable Federal agency or the Administration to determine the extent of compliance by the offeror or bidder with the subcontracting plan;

; and

(C)

by moving the margins for subparagraphs (A), (B), (C), (D), and (F) 2 ems to the right (so that the align with subparagraph (E), as amended by subparagraph (B) of this paragraph).

(2)

Reporting system modification

(A)

In general

Not later than 1 year after the date of enactment of this Act, the Administrator of the Small Business Administration shall take such actions as are necessary to ensure that the Federal subcontracting reporting system to which covered reports are submitted is modified to notify the Administrator, the appropriate contracting officer, and the appropriate Director of Small and Disadvantaged Business Utilization if an entity fails to submit a required covered report. If the Administrator does not modify the subcontracting reporting system on or before the date that is 1 year after the date of enactment of this Act, the Administrator may not carry out or establish any pilot program until the date the Administrator modifies the reporting system.

(B)

Covered report defined

In this paragraph, the term covered report means a report submitted in accordance with assurances provided under section 8(d)(6)(E) of the Small Business Act (15 U.S.C. 637(d)(6)(E)).

(b)

Failure To submit subcontracting reports as breach of contract

Section 8(d)(8) of such Act (15 U.S.C. 637(d)(8)) is amended—

(1)

by striking (8) The failure and inserting the following:

(8)

Material breach

The failure

;

(2)

in subparagraph (A) by striking subsection, or and inserting subsection,;

(3)

in subparagraph (B) by striking subcontract, and inserting subcontract, or;

(4)

by inserting after subparagraph (B) the following:

(C)

assurances provided under paragraph (6)(E),

; and

(5)

by moving the margins of subparagraphs (A), (B), and the matter following subparagraph (B) 2 ems to the right.

(c)

Authority of Small Business Administration

Section 8(d)(10) of such Act (15 U.S.C. 637(d)(10)) is amended—

(1)

by striking (10) In the case of and inserting the following:

(10)

Authority of Administration

In the case of

;

(2)

in subparagraph (B) by striking , which shall be advisory in nature,;

(3)

in subparagraph (C) by striking , either on a contract-by-contract basis, or in the case contractors and inserting as a supplement to evaluations performed by the contracting agency, either on a contract-by-contract basis or, in the case of contractors; and

(4)

by moving the margins of subparagraphs (A) through (C) 2 ems to the right.

(d)

Appeals

Section 8(d) of such Act (15 U.S.C. 637(d)) is amended by adding at the end the following:

(13)

Appeals

(A)

In general

If a procurement center representative or commercial market representative determines that a subcontracting plan required under paragraph (4) or (5) fails to provide the maximum practicable opportunity for covered small business concerns to participate in the performance of the contract to which the plan applies, such representative may delay acceptance of the plan in accordance with subparagraph (B).

(B)

Process

A procurement center representative or commercial market representative who makes the determination under subparagraph (A) with respect to a subcontracting plan may delay acceptance of the plan for a 30-day period by providing written notice of such determination to appropriate personnel of the contracting agency. Such notice shall include recommendations for altering the plan to provide the maximum practicable opportunity described in that subparagraph.

(C)

Disagreements

If a procurement center representative or commercial market representative delays the acceptance of a subcontracting plan under subparagraph (B) for a 30-day period and, during such period, does not reach agreement with appropriate personnel of the contracting agency to alter the plan to provide the maximum practicable opportunity described in subparagraph (A), the disagreement shall be submitted to the head of the contracting agency by the Administrator for a final determination.

(D)

Covered small business concerns defined

In this paragraph, the term covered small business concerns means small business concerns, qualified HUBZone small business concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled by service-disabled veterans, small business concerns owned and controlled by socially and economically disadvantaged individuals, and small business concerns owned and controlled by women.

.

202.

Notices of subcontracting opportunities

Section 8(k)(1) of the Small Business Act (15 U.S.C. 637(k)(1)) is amended by striking in the Commerce Business Daily and inserting on the appropriate Federal Web site (as determined by the Administrator).

203.

Regulations

Not later than 180 days after the date of enactment of this Act, the Administrator of the Small Business Administration shall issue guidance with respect to the changes made to the Small Business Act, with opportunity for notice and comment.

III

Insourcing

301.

Definitions relating to procurement protest system

(a)

Protest

Section 3551(1) of title 31, United States Code, is amended by adding at the end the following:

(F)

Conversion of a function that is being performed by a small business concern to performance by a Federal employee.

.

(b)

Interested party

Section 3551(2) of such title is amended—

(1)

in subparagraph (A) by striking and at the end;

(2)

in subparagraph (B) by striking the period at the end and inserting ; and; and

(3)

by adding at the end the following:

(C)

with respect to a conversion described in paragraph (1)(F), means a small business concern (as that term is defined in section 3(a) of the Small Business Act) whose economic interest would be affected by the conversion.

.

302.

Insourcing

The Small Business Act (15 U.S.C. 631 et seq.), as amended by this Act, is further amended by inserting after section 45 the following:

46.

Insourcing

A Federal agency may only convert a function that is being performed by a small business concern to performance by a Federal employee if—

(1)

the agency has made publicly available, after providing notice and an opportunity for public comment, the procedures of the agency with respect to decisions to convert a function being performed by a small business concern to performance by a Federal employee; and

(2)

the procedures described in paragraph (1) include that all decisions described in such paragraph are reviewed by any appropriate—

(A)

Office of Small and Disadvantaged Business Utilization; and

(B)

procurement center representative.

.

December 27, 2012

Reported from the Committee on Small Business with an amendment

December 27, 2012

The Committee on Oversight and Government Reform discharged; committed to the Committee of the Whole House on the State of the Union and ordered to be printed