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                                                       Calendar No. 254
106th Congress                                                   Report
 1st Session                                                    106-136




                 August 4, 1999.--Ordered to be printed


Mr. Bond, from the Committee on Small Business, submitted the following

                              R E P O R T

                        [To accompany H.R. 1568]

    On July 15, 1999, the Committee on Small Business 
considered H.R. 1568. The Committee adopted a substitute 
amendment offered by Chairman Bond and Ranking Democrat Kerry. 
As amended, the bill provides technical, financial, and 
procurement assistance to veteran-owned small businesses. H.R. 
1568, as passed by the House of Representatives, and the 
substitute amendment incorporated the ``Military Reservists 
Small Business Relief Act of 1999'' (S. 918), which had 
previously been approved by the Committee on June 9, 1999. 
Having considered H.R. 1568, as amended, the Committee reports 
favorably thereon with an amendment and recommends that the 
bill do pass.

                       I. Description Of The Bill

    The Veterans Entrepreneurship and Small Business 
Development Act of 1999 (H.R. 1568) seeks to provide assistance 
to veteran-owned small businesses to enable them to start-up 
and grow their businesses. The bill places a specific emphasis 
on small businesses owned and controlled by service-disabled 
    Under Title II of the bill, a federally chartered 
corporation called the National Veterans Business Development 
Corporation (Corporation/NVBDC) is established. The purpose of 
the corporation is to improve assistance provided to veterans 
who wish to start-up or expand small businesses. The 
Corporation is directed to establish a network of information 
and assistance centers for use by veterans and the general 
public. The Corporation will be governed by a board of 
directors appointed by the Administrator of the Small Business 
Administration (SBA), after considering recommendations from 
the Chairmen and Ranking Members from the Committees on Small 
Business and Veterans Affairs of the Senate and House of 
Representatives. Funds are authorized for four years to support 
the start-up activities of the Corporation, and the Corporation 
will provide matching funds raised from non-Federal sources 
during the last three years of the authorization. The Committee 
expects that the Corporation will become self-sufficient and 
will no longer need Federal funding after its initial four 
years of Federal support. Two years after the first board of 
directors is appointed, the Comptroller General is directed to 
complete a study on the effectiveness of the Corporation in 
carrying out the purposes of the Act.
    Title III of H.R. 1568 directs SBA to make better use of 
its resources to help small businessowned and controlled by 
veterans. SBA is required to insure that the SCORE Program and the 
Small Business Development Center Program work directly with the 
Corporation so that veteran entrepreneurs receive technical assistance 
and other needed support. In addition, Title III incorporates a part of 
the ``Military Reservists Small Business Relief Act of 1999,'' (S. 918) 
which the Committee approved unanimously on June 9, 1999. This 
provision directs SBA to use its existing entrepreneurial development 
programs to assist small businesses that are impacted when a military 
reservist is called to active duty. SBA and its private sector partners 
are required to advertise their entrepreneurial development and 
management assistance programs, such as Business Information Centers, 
Women's Business Centers, Small Business Development Centers and SCORE, 
and to make them available to small businesses that are losing or have 
lost an essential employee to a military call-up.
    Title IV places a special emphasis on the credit programs 
at SBA that can be helpful to veterans and especially to 
service-disabled veterans. The bill specifically targets 
veterans for the 7(a) guaranteed business loan program, the 504 
Development Company Loan Program, and the Microloan program. In 
addition, this title incorporates key provisions from S. 918, 
which authorizes the SBA to provide loan deferrals, reductions 
in interest rates and low-interest economic injury loans to 
small businesses adversely affected by the call-up of certain 
military reservists. (For a more detailed discussion of S. 918, 
see Senate Report 106-84.)
    The intention of Title V is to make Federal government 
contracts more readily available to service disabled veterans 
who own and control small businesses. The Committee adopted an 
annual goal of 3% and sees this goal as an incentive to Federal 
agencies to undertake a major effort to make their procurement 
activities more accessible to veterans who sacrificed their 
health and limbs for our Nation. In addition, the Committee 
included a requirement that the Office of Federal Procurement 
Policy (OFPP) collect data to be reported annually to Congress 
on the number and dollar value of contracts and subcontracts 
awarded by Federal agencies to veteran-owned small businesses 
and service-disabled veteran-owned small businesses.

                        ii. need for legislation

    Since 1997, the Committee on Small Business has considered 
and approved three bills to provide special help to veteran 
entrepreneurs, with a special emphasis given to service-
disabled veterans. These actions became necessary as Federal 
support for veterans entrepreneurs, particularly service-
disabled veterans, has declined. The Committee believes that 
the SBA has not provided enough assistance to veteran 
    When Congress approved the Small Business Reauthorization 
Act of 1997, the most recent 3 year re-authorization of SBA 
programs, it included a separate title to improve business 
opportunities for service-disabled veterans. The Committees on 
Small Business of the Senate and House of Representatives 
believed strongly that these individuals deserve better support 
from the Federal agencies than they had received historically. 
The 1997 Reauthorization Act required the SBA to undertake a 
comprehensive report on the needs of small businesses owned and 
controlled by service-disabled veterans. This report is still 
not complete, and Senator Kerry and I joined with Mr. Talent 
and Ms. Velazquez, Chairman and Ranking Democrat of the House 
Committee on Small Business, in sending letters to numerous 
Federal agencies urging them to cooperate with the investigator 
at the University of Massachusetts who is under contract with 
SBA to prepare this report.
    In 1998, the Committee approved new initiatives to 
strengthen the mandate that SBA's programs be more responsive 
to all veteran small business owners. The ``Year 2000 Readiness 
and Small Business Restructuring and Reform Act of 1998'' (H.R. 
3412) directed that veterans receive comprehensive help at SBA. 
This bill passed the Senate unanimously in September 1998; 
unfortunately, it was not taken up by the House of 
Representatives before the adjournment in the fall. The bill 
would have elevated the Office of Veterans Affairs at SBA to 
the Office of Veterans Business Development, to be headed by an 
Associate Administrator who would report directly to the SBA 
Administrator. This provision is contained in H.R. 1568.
    In addition, H.R. 3412 would have established an Advisory 
Committee on Veterans' Business Affairs comprised of veterans 
who own small businesses and representatives of national 
veterans service organizations. The bill also would have 
established the position of National Veterans' Business 
Coordinator within the Service Corps of Retired Executives 
(SCORE) Program. This new position would work within the SBA 
headquarters to ensure that SCORE's programs nationwide 
included entrepreneurial counseling and training for veterans. 
Both initiatives from H.R. 3412 are included in H.R. 1568.
    Most recently, on June 6, 1999, the Committee approved the 
Military Reservists Small Business Relief Act of 1999 (S. 918) 
to assist military reservists called to active duty and the 
small businesses that employ them. This bill complements the 
provisions of the Veterans Entrepreneurship and Small Business 
Development Act. Accordingly, the Committee voted unanimously 
to incorporate the full text of S. 918 into Title III 
(Technical Assistance) and Title IV (Financial Assistance) of 
H.R. 1568.
    During and after the Persian Gulf War in the early 1990's, 
the Committee heard from reservists whose businesses were 
harmed, severely crippled, or even lost, by their absence. 
Problems faced by reservists called to active duty and their 
small businesses were of a varied nature and included cash-flow 
problems, difficulties with training an appropriate alternate 
manager on very short notice to run the business during the 
period of service, lost clientele upon return, and on occasion, 
bankruptcy. These hardships can occur during a period of 
national emergency or during a period of contingency operation 
when troops are deployed overseas.
    To help such reservists and their small businesses, the 
Committee seeks to provide credit and management assistance to 
small businesses when an essential employee (i.e., an owner, 
manager or vital member of the business' staff) is a reservist 
called to active duty. The Committee believes thatfinancial 
assistance in the form of loans, loan deferrals and managerial guidance 
are effective ways to minimize the adverse financial demands of the 
call to active duty. They not only ameliorate financial difficulties 
but also strengthen small businesses.
    H.R. 1568 authorizes a deferral of loan repayments on any 
SBA direct loan, including a disaster loan, for an eligible 
small business. SBA is authorized to reduce the interest rate 
on the direct loans. SBA is also directed to publish guidelines 
within 30 days of enactment of the legislation to help its 
lending partners in the 7(a) guaranteed business loan program 
and the 504 Development Company program to develop procedures 
for providing loan repayment relief to small businesses that 
have been adversely affected by the departure of an essential 
employee to active military duty. Further, the bill establishes 
a low-interest economic injury loan program to be administered 
by the SBA through its disaster loan program. The purpose of 
these loans will be to provide interim operating capital to a 
small business that suffers substantial economic injury as a 
result of the departure of its essential employee to active 
duty and cannot obtain credit elsewhere.
    To address the management needs of any small business whose 
owner or manager must depart suddenly to report to active duty, 
H.R. 1568 relies on existing entrepreneurial development 
programs at SBA. Since many small businesses are not aware 
these services exist and are available at little or no cost, 
SBA and its private sector partners are directed to advertise 
their entrepreneurial development and management assistance 

                          iii. committee vote

    In compliance with rule XXVI(7)(b) of the Standing Rules of 
the Senate, the following votes on H.R. 1568 were recorded on 
July 15, 1999. A motion by Senator Bond to adopt the substitute 
amendment passed by unanimous voice vote. A motion by Senator 
Bond to adopt the Veterans Entrepreneurship and Small Business 
Development Act of 1999, with an amendment in the nature of a 
substitute, was approved by a unanimous recorded vote, with the 
following Senators voting in the affirmative: Bond, Kerry, 
Burns, Coverdell, Bennett, Snowe, Enzi, Fitzgerald, Crapo, 
Abraham, Levin, Harkin, Lieberman, Wellstone, Cleland, 
Landrieu, and Edwards.

                           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 indicated by the 
Congressional Budget Office in the following letter.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 23, 1999.
Hon. Christopher S. Bond,
Chairman, Committee on Small Business,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1568, the Veterans 
Entrepreneurship and Small Business Development Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts for federal 
costs are Mark Hadley and Megan Carroll. The staff contact for 
the state and local impact is Shelley Finlayson.
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).

H.R. 1568--Veterans Entrepreneurship and Small Business Development Act 
        of 1999

    Summary: H.R. 1568 would expand federal assistance to small 
businesses owned by veterans. It would establish a federally 
chartered corporation to coordinate assistance to small 
business owners who are veterans. In addition, it would 
establish an Office of Veterans Business Development and an 
advisory committee on veterans affairs within the Small 
Business Administration (SBA). Section 402 would authorize the 
SBA to modify and expand certain loan programs to assist small 
business that employ military reservists who are called to 
active duty. Finally, the act would direct the SBA and the 
General Accounting Office to prepare several reports and would 
provide other forms of assistance to small businesses that are 
owned by veterans.
    Assuming appropriation of the necessary amounts, CBO 
estimates that implementing H.R. 1568 would increase 
discretionary spending by about $24 million over the 2000-2004 
period. CBO also estimates that enacting the legislation would 
increase direct spending by about $1 million in fiscal year 
1999. Therefore, pay-as-you-go procedures would apply to this 
legislation. H.R. 1568 contains no intergovernmental or 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act (UMRA). Any costs to state, local, or tribal 
governments would be the result of complying with grant 
    Estimated cost to the Federal Government: For the purposes 
of this estimate, CBO assumes that H.R. 1568 will be enacted 
during fiscal year 1999. The estimated budgetary effects of 
H.R. 1568 are shown in the following table. In addition to the 
amounts shown in the table, CBO estimates that the provisions 
authorizing the receipt and use of gifts and donations would 
have a negligible effect on direct spending and governmental 
receipts over the 2000-2004 period. The costs of this 
legislation fall within budget functions 370 (commerce and 
housing credit) and 450 (community and regional development).

                                    [By fiscal year, in millions of dollars]
                                                                   1999    2000    2001    2002    2003    2004

                                        SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level...................................       0       5       6       6       4       3
Estimated Outlays...............................................       0       5       6       6       4       3

                                                 DIRECT SPENDING

Estimated Budget Authority......................................       1       0       0       0       0       0
Estimated Outlays...............................................       1       0       0       0       0       0

Basis of estimate

            Spending subject to appropriation
    H.R. 1568 would authorize the appropriation of $12 million 
over the 2000-2003 period for the National Veterans Business 
Development Corporation. For purposes of this estimate, CBO 
assumes that the corporation would receive and spend the entire 
amount appropriated for each year. Based on information from 
SBA, CBO estimated that implementing the other provisions of 
the act would increase administrative costs by an additional 
$12 million over the 2000-2004 period.
    Section 402 would expand the disaster loan program to 
include small businesses that suffer substantial economic 
injury as a result of an essential employee being ordered to 
active duty during a period of military conflict. The Federal 
Credit Reform Act of 1990 requires appropriations for the 
subsidy costs and administrative costs of credit programs. The 
subsidy cost is the estimated long-term cost to the government 
of a direct loan or loan guarantee, calculated on a net present 
value basis and excluding administrative costs. Implementing 
section 402 of the act could result in additional subsidy costs 
for making new loans. Although CBO cannot predict the number, 
timing, or extent of future military conflicts or the number of 
small businesses that would be affected, the costs are not 
likely to be significant in most years. We estimate that 
additional subsidy costs would average less than $500,000 a 
            Direct spending
    Section 402 would allow the SBA to defer principal and 
interest payments due on small business loans if a military 
reservist is called to active duty during a period of military 
conflict and the reservist is an essential employee of the 
small business. The deferral would last from the date on which 
the reservist is ordered to active duty until 180 days after 
the reservist is released. Section 402 also would allow the SBA 
to reduce the interest rate on loan qualifying for a deferral. 
The act would encourage lenders and intermediaries to grant 
similar deferrals for loans guaranteed by the SBA.
    Section 402 would increase direct spending because it would 
raise the expected cost of existing loans to small businesses. 
CBO estimates that enacting this provision would probably 
increase direct spending by about $1 million in 1999, based on 
information from the SBA. We estimate that the deferral 
provision would affect fewer than 500 small business disaster 
loans (out of the 70,000 outstanding), with an average loan 
size of $50,000, and that the deferment of principal and 
interest payments would increase the average subsidy costs on 
those loans by about 5 percentage points. The increase in 
subsidy costs would be recorded as an outlay in the year in 
which the legislation is enacted.
    Authorizing the advisory committee to accept and use gifts 
and donations would affect direct spending and governmental 
receipts. CBO expects that any contributions (recorded in the 
budget as revenues) would be spent in the same year as they 
were received. Therefore, we estimate that the net budgetary 
impact of the gift authority granted to the advisory committee 
would be negligible.
    Pay-as-you-go-considerations: The Balanced Budget and 
Emergency Control Act sets up pay-as-you-go procedures for 
legislation affecting direct spending or receipts. H.R. 1568 
would affect direct spending and receipts by increasing the 
cost of existing loans and by allowing the new advisory 
committee to accept donations. CBO estimates that enacting H.R. 
1568 would increase direct spending by $1 million in 1999 and 
by less than $500,000 in each subsequent year and would 
increase governmental receipts by less than $500,000 a year.
    Intergovernmental and private-sector impact: H.R. 1568 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. The act would modify existing programs that 
require matching funds from public or private entities, 
including state, local and tribal governments. Any cost to 
these governments from the requirements of the programs would 
be incurred voluntarily.
    Previous CBO estimates: On June 29, 1999, CBO transmitted a 
cost estimate for H.R. 1568 as ordered reported by the House 
Committee on Small Business on June 23, 1999. That version of 
the legislation is similar to this version, and CBO's estimates 
of costs are identical.
    On June 16, 1999, CBO transmitted an estimate of S. 918, 
the Military Reservists Small Business Relief Act of 1999, as 
ordered reported by the Senate Committee on Small Business on 
June 9, 1999. That bill is identical to section 402 of H.R. 
1568; CBO estimated that enacting S. 918 would increase direct 
spending by about $1 million in 1999 and spending subject to 
appropriation by less than $500,000 a year--the same amounts 
estimated for section 402 of H.R. 1568.
    Estimate prepared by: Federal costs: Mark Hadley and Megan 
Carroll; Impact on State, local, and tribal governments: 
Shelley Finlayson.
    Estimate approved by: Paul N. Van de Water, 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 of the personal privacy of companies or 
individuals who utilize the assistance authorized by this 

                      vi. changes in existing law

    In the Opinion of the Committee, it is necessary to 
dispense with the requirement of rule XXVI(12) of the Standing 
Rules of the Senate in order to expedite the business of the 

                    vii. section-by-section analysis

                      Title I--General Provisions

Section 101. Findings

    Describes Congressional findings regarding the sacrifices 
and efforts of veterans and their value to the American economy 
as small business owners.

Section 102. Purpose

    Describes the purpose of the Act, to encourage the SBA and 
other agencies to implement further efforts to assist veterans, 
particularly service-disabled veterans, in the formation and 
growth of small businesses.

Section 103. Definitions

    Establishes definitions of veteran owned and service-
disabled veteran owned small business concerns. The term 
``service-disabled veterans'' is based on the definition in 
Title 38 of the U.S. Code.

                Title II--Veterans Business Development

Section 201. Office of Veterans Business Development

    Establishes an Office of Veterans Business Development and 
the position of Associate Administrator for Veterans Business 
Development at the Small Business Administration. This position 
will be responsible for the formulation, execution, and 
promotion of programs to provide assistance for small 
businesses owned and controlled by veterans.

Section 202. National Veterans Business Development Corporation

    Establishes a federally chartered corporation, the National 
Veterans Business Development Corporation (Corporation/NVBDC), 
for the purpose of guiding and monitoring public and private 
sector initiatives to assist the Nation's veterans in their 
efforts to form and grow small businesses. The most significant 
single purpose of the Corporation will be to work with the 
public and private sectors to establish an independent 
nationwide network of business assistance and information 
centers for veterans. The Corporation will be managed by a 
Board of Directors appointed in a bipartisan fashion by the 
President based on recommendations from the Congress. It will 
have the power to raise and disburse funds, establish 
initiatives, and award grants in furtherance of its goal of 
establishing a cohesive assistance and information network for 
veteran owned business.
    The Corporation will also establish an advisory board on 
professional certification to work on the problems service 
members with military technical training face as they 
transition to the private sector workforce. The board will be 
composed of representatives of professional certification 
organizations, such as the Coalition for Professional 
Certification and veterans organizations such as the American 
Legion. In addition, the Board of Directors of the NVBDC shall 
invite representatives of the Armed Services and the Department 
of Labor to participate.
    The Corporation will have an initial authorization of $2 
million in the first year and $4 million in the second and 
third years, dropping back to $2 million in the fourth and 
final year. After the fourth year, the Corporation will be self 
funded from private donations and no longer be eligible for 
federal funds. The Corporation will be required to put up 
matching funds in the 2d through 4th years.

Section 203. Advisory Committee on Veterans Affairs

    Establishes an eight member committee to provide 
independent advice and policy recommendations to the SBA, 
Congress, and the President. The committee will conduct 
hearings, collect information from federal agencies, develop, 
monitor and promote programs to aid veteran's business 
development, and issue an annual report to the Congress. The 
Committee will terminate on September 30, 2004 and its 
responsibilities will devolve onto the National Veterans 
Business Development Corporation.

                    Title III--Technical Assistance

Section 301. SCORE Program

    Requires the Service Corps of Retired Executives (SCORE) 
and the SBA to establish a program for directing management and 
technical assistance to veteran-owned small business and 
veterans wishing to establish small business concerns.

Section 302. Entrepreneurial assistance

    Requires the Small Business Development Center (SBDC) 
system and the SBA to establish a program for outreach and 
assistance to veterans and veteran-owned small businesses.

Section 303. Military reservists technical assistance

    Establishes a program of technical and managerial 
assistance through the SBA for military reservists who are 
self-employed or are small business owners and are called to 
active military duty. Directs SBA to enhance its publicity of 
such assistance for the duration of Operation ``Allied Force.''

                     Title IV--Financial Assistance

Section 401. General business loans

    Includes service-disabled veterans with handicapped 
individuals in provisions requiring that loan making decisions 
shall be resolved in favor of the prospective borrower. This 
provision applies only to guaranteed loans and makes no 
requirement that the SBA re-institute the direct loan program.

Section 402. Assistance to active duty military reservists

    Requires the SBA to establish a system for loan deferrals 
for small business owners called up for active duty. Also 
requires the SBA to make economic injury disaster loans 
available to self- employed individuals who are called to 
active duty for the National Guard and Reserves and have 
suffered, or are likely to suffer, substantial economic injury.

Section 403. Microloan Program

    Makes veterans eligible for assistance under the SBA's 
microloan program which provides small loans (under $25,000) to 
people seeking initial financing for small business start-up or 

Section 404. Defense Economic Transition Loan Program

    Includes veteran owned small businesses in the eligibility 
categories for assistance under the DELTA loan program at the 

Section 405. State Development Company Program

    Includes the formation and creation of veteran-owned small 
business in the public policy goals sought in the 504 loan 
program for construction and long-term equipment loans.

                          Title V--Procurement

Section 501. Subcontracting

    Requires the inclusion of small business concerns owned and 
controlled by veterans in the mandatory subcontracting clause 
in all government contracts that establishes subcontracting 

Section 502. Procurement assistance

    Requires the SBA to establish a three percent goal for 
contracting with small business concerns owned and controlled 
by service disabled veterans.

                       Title VI--Reports and Data

Section 601. Reporting requirements

    Requires the heads of each federal agency to report to the 
Small Business Administration concerning contracting with 
veteran owned and service-disabled veteran owned small 

Section 602. Report on small business and competition

    Requires the SBA to include information on small business 
concerns owned by veterans and service disabled veterans in the 
annual report on small business participation and opportunities 
in federal procurement.

Section 603. Annual report

    Requires the Administrator to submit an annual report to 
Congress on the needs of veteran owned small business and the 
progress of programs designed to aid and promote veterans small 
business ownership. The Administrator shall also provide 
statistical information on veterans participation in SBA 

Section 604. Data and information collection

    Requires that SBA collect procurement data on veterans and 
service-disabled veteran owned small businesses and information 
on the procurement practices of each federal agency. All such 
information is to be made available to any small business 
concern requesting it. The information is also to be 
distributed to federal procurement officers. Directs the SBA 
and VA to work to establish a database on veteran owned small 
business concerns. Requires a modification of the Federal 
Procurement Data System so that it collects data regarding the 
percentage and dollar value of prime contracts and subcontracts 
awarded to small business concerns owned and controlled by 
veterans and service-disabled veterans.

                  Title VII--Miscellaneous Provisions

Section 701. Administrator's order

    Requires the administrator to strengthen and reissue the 
order implementing the provisions of P.L. 93-237 which requires 
the SBA to fully include veterans in all the programs, purposes 
and activities of the agency.

Section 702. Small Business Administration Office of Advocacy

    Requires the Chief Counsel for Advocacy of the Small 
Business Administration to include an evaluation of the efforts 
of the federal government to assist veteran owned small 
business concerns as one of his primary functions. The Chief 
Counsel is also required to provide statistical information on 
veterans utilization of federal programs. Requires the Chief 
Counsel to make recommendations to the Administrator of the SBA 
and Congress on programs and efforts to assist veteran owned 
small business concerns.

Section 703. Study of fixed-asset small business loans

    Requires the Government Accounting Office to conduct a 
study of the feasibility of using the VA home ownership loan 
program as a source of fixed asset financing for veteran-owned 
small businesses.