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110th Congress                                            Rept. 110-111
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

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



 
               SMALL BUSINESS FAIRNESS IN CONTRACTING ACT

                                _______
                                

                 April 26, 2007.--Ordered to be printed

                                _______
                                

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

                              R E P O R T 

                       [To accompany H. R. 1873]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 1873) to reauthorize the programs and activities of 
the Small Business Administration relating to procurement, and 
for other purposes, having considered the same report favorably 
thereon with an amendment and recommend that the bill as 
amended to pass.



                                CONTENTS

                              ----------                              
                                                                   Page
  I. Amendment........................................................1
 II. Purpose and Summary..............................................6
III. Background and Need for Legislation..............................7
 IV. Hearings........................................................14
  V. Committee Consideration.........................................14
 VI. Committee Votes.................................................14
VII. Section-by-Section Analysis of Procurement Bill.................14
VIII.Committee Estimate of Costs.....................................22

 IX. Oversight Findings..............................................22
  X. Statement of Constitutional Authority...........................22
 XI. Compliance With Public Law 104-4................................22
XII. Congressional Accountability Act................................22
XIII.Federal Advisory Committee Statement............................22

XIV. Statement of No Earmarks........................................22
 XV. Performance Goals and Objectives................................22
XVI. Changes in Existing Law Made by the Bill, as Reported...........23

                              I. Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Small Business 
Fairness in Contracting Act''.
(b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Regulations.

                       TITLE I--CONTRACT BUNDLING

Sec. 101. Definitions of bundling of contract requirements and related 
terms.
Sec. 102. Justification.
Sec. 103. Appeals.
Sec. 104. Third-party review.

    TITLE II--INCREASING THE NUMBER OF SMALL BUSINESS CONTRACTS AND 
                              SUBCONTRACTS

Sec. 201. Small business goal.
Sec. 202. Include overseas contracts in small business goal.
Sec. 203. Annual goal negotiation.
Sec. 204. Goal reasonableness.
Sec. 205. Usage of small companies in goal achievement.
Sec. 206. Annual plan for each agency explaining how agency will meet 
small business goals.
Sec. 207. Making small businesses the first choice.
Sec. 208. Uniform metric for subcontracting achievements.
Sec. 209. Subcontracting database.
Sec. 210. National database.
Sec. 211. Review of subcontracting plans.
Sec. 212. Agency obligation for fulfilling contracting goals.

             TITLE III--PROTECTION OF TAXPAYERS FROM FRAUD

Sec. 301. Small business size protest notification.
Sec. 302. Review of national registry.
Sec. 303. Recertification of compliance with size standards and 
registration with Central Contractor Registry.

               TITLE IV--AUTHORIZATION OF APPROPRIATIONS

Sec. 401. Authorization of appropriations.

SEC. 2. REGULATIONS.

(a) In General.--Not later than 180 days after the date of the 
enactment of this Act--
    (1) the Administrator of the Small Business Administration shall 
promulgate regulations to implement this Act and the amendments made by 
this Act; and
    (2) the Federal Acquisition Regulation shall be revised to 
implement this Act and the amendments made by this Act.
(b) Notice and Comment.--The regulations required by subsection (a) 
shall be promulgated after opportunity for notice and comment as 
required by section 553(b) of title 5, United States Code.

                       TITLE I--CONTRACT BUNDLING

SEC. 101. DEFINITIONS OF BUNDLING OF CONTRACT REQUIREMENTS AND RELATED 
                    TERMS.

Section 3 of the Small Business Act (15 U.S.C. 632) is amended by 
amending subsection (o) to read as follows:
``(o) Definitions of Bundling of Contract Requirements and Related 
Terms.--For purposes of this Act:
    ``(1) Bundled contract.--
    ``(A) In general.--The term `bundled contract' means a contract or 
order that is entered into to meet procurement requirements that are 
consolidated in a bundling of contract requirements, without regard to 
its designation by the procuring agency or whether a study of the 
effects of the solicitation on civilian or military personnel has been 
made.
    ``(B) Exceptions.--The term does not include--
    ``(i) a contract or order with an aggregate dollar value below the 
dollar threshold specified in paragraph (4); or
    ``(ii) a contract or order that is entered into to meet procurement 
requirements, all of which are exempted requirements under paragraph 
(5).
    ``(2) Bundling of contract requirements.--
    ``(A) In general.--The term `bundling of contract requirements' 
means the use of any bundling methodology to satisfy 2 or more 
procurement requirements for new or existing goods or services, 
including any construction services, that is likely to be unsuitable 
for award to a small business concern due to--
    ``(i) the diversity, size, or specialized nature of the elements of 
the performance specified;
    ``(ii) the aggregate dollar value of the anticipated award;
    ``(iii) the geographical dispersion of the contract or order 
performance sites; or
    ``(iv) any combination of the factors described in clauses (i), 
(ii), and (iii).
    ``(B) Exceptions.--The term does not include--
    ``(i) the use of a bundling methodology for an anticipated award 
with an aggregate dollar value below the dollar threshold specified in 
paragraph (4); or
    ``(ii) the use of a bundling methodology to meet procurement 
requirements, all of which are exempted requirements under paragraph 
(5).
    ``(3) Bundling methodology.--The term `bundling methodology' 
means--
    ``(A) a solicitation to obtain offers for a single contract or 
order, or a multiple award contract or order;
    ``(B) a solicitation of offers for the issuance of a task or a 
delivery order under an existing single or multiple award contract or 
order; or
    ``(C) the creation of any new procurement requirement that permits 
a consolidation of contract or order requirements.
    ``(4) Dollar threshold.--The term `dollar threshold' means--
    ``(A) $65,000,000, if solely for construction services; and
    ``(B) $1,500,000, in all other cases.
    ``(5) Exempted requirements.--The term `exempted requirement' means 
one or more of the following:
    ``(A) A procurement requirement solely for items that are not 
commercial items (as the term `commercial item' is defined in section 
4(12) of the Office of Federal Procurement Policy Act (41 U.S.C. 
403(12))).
    ``(B) A procurement requirement with respect to which a 
determination that it is unsuitable for award to a small business 
concern has previously been made by the agency. However, the 
Administrator shall have authority to review and reverse such a 
determination for purposes of this paragraph and, if the Administrator 
does reverse that determination, the term `exempted requirement' shall 
not apply to that procurement requirement.
    ``(6) Procurement requirement.--The term `procurement requirement' 
means a determination by an agency that a specified good or service is 
needed to satisfy the mission of the agency.''.

SEC. 102. JUSTIFICATION.

Section 15(a) of the Small Business Act (15 U.S.C. 644(a)) is amended--
    (1) by striking ``is in a quantity or estimated dollar value the 
magnitude of which renders small business prime contract participation 
unlikely'' and inserting ``would now be combined with other 
requirements for goods and services'';
    (2) by striking ``(2) why delivery schedules'' and inserting ``(2) 
the names, addresses and size of the incumbent contract holders; (3) a 
description of the industries that might be interested in bidding on 
the contract requirements; (4) the number of small businesses listed in 
the industry categories that could be excluded from future bidding if 
the contract is combined or packaged; (5) why delivery schedules'';
    (3) by striking ``(3) why the proposed acquisition'' and inserting 
``(6) why the proposed acquisition'';
    (4) by striking ``(4) why construction'' and inserting ``(7) why 
construction'';
    (5) by striking ``(5) why the agency'' and inserting ``(8) why the 
agency'';
    (6) by striking ``justified.'' and inserting ``justified. The 
statement shall also set forth the proposed procurement strategy 
required by subsection (e) and, if applicable, the specifications 
required by subsection (e)(3). Concurrently, the statement shall be 
made available to the public, including through dissemination in the 
Federal contracting opportunities database.''; and
    (7) by inserting after ``prime contracting opportunities.'' the 
following: ``If no notification of the procurement and accompanying 
statement is received, but the Administrator determines that there is 
cause to believe the contract combines requirements or a contract 
(single or multiple award) or task or delivery order for construction 
services or includes unjustified bundling, then the Administrator can 
demand that such a statement of work goods or services be completed by 
the procurement activity and sent to the Procurement Center 
Representative and the solicitation process postponed for at least 10 
days to allow the Administrator to review the statement and make 
recommendations as described in this section before the procurement is 
continued.''.

SEC. 103. APPEALS.

Section 15(a) of the Small Business Act (15 U.S.C. 644(a)) is amended--
    (1) by striking ``If a proposed procurement includes in its 
statement'' and inserting ``If a proposed procurement would negatively 
affect one or more small business concerns, or if a proposed 
procurement includes in its statement''; and
    (2) by inserting before ``Whenever the Administration and the 
contracting procurement agency fail to agree,'' the following: ``If a 
small business concern would be adversely affected, directly or 
indirectly, by the procurement as proposed, and that small business 
concern or a trade association on behalf of that small business concern 
so requests, the Administrator may, in the Administrator's discretion, 
take action to further the interests of that small business concern.''.

SEC. 104. THIRD-PARTY REVIEW.

Section 15(a) of the Small Business Act (15 U.S.C. 644(a)) is amended 
by striking the sentence beginning ``Whenever the Administration and 
the contracting procurement agency fail to agree,'' and inserting the 
following: ``Whenever the Administrator and the contracting procurement 
agency fail to agree, the Administrator shall submit the matter to the 
Administrator of the Office of Federal Procurement Policy within the 
Office of Management and Budget, who shall render his decision 
regarding the matter not later than 10 days after receiving the 
matter.''.

    TITLE II--INCREASING THE NUMBER OF SMALL BUSINESS CONTRACTS AND 
                              SUBCONTRACTS

SEC. 201. SMALL BUSINESS GOAL.

Section 15(g)(1) of the Small Business Act (15 U.S.C. 644(g)(1)) is 
amended by striking ``23 percent'' and inserting ``30 percent''.

SEC. 202. INCLUDE OVERSEAS CONTRACTS IN SMALL BUSINESS GOAL.

Section 15(g) of the Small Business Act (15 U.S.C. 644(g)) is amended 
by adding at the end the following:
``(3) The procurement goals required by this subsection apply to all 
procurement contracts, without regard to whether the contract is for 
work within or outside the United States.''.

SEC. 203. ANNUAL GOAL NEGOTIATION.

Section 15(g)(1) of the Small Business Act (15 U.S.C. 644(g)(1)) is 
amended by striking ``The President shall annually establish 
Government-wide goals for procurement contracts'' and inserting ``The 
President shall before the close of each fiscal year establish new 
Government-wide procurement goals for the following fiscal year for 
procurement contracts''.

SEC. 204. GOAL REASONABLENESS.

Section 15(g)(1) of the Small Business Act (15 U.S.C. 644(g)(1)) is 
amended by striking ``Notwithstanding the Government-wide goal, each 
agency shall have an annual goal'' and inserting ``Each agency shall 
have an annual goal, not lower than the Government-wide goal,''.

SEC. 205. USAGE OF SMALL COMPANIES IN GOAL ACHIEVEMENT.

Section 15(g) of the Small Business Act (15 U.S.C. 644(g)) is amended 
by adding at the end the following:
``(4) For purposes of this subsection and subsection (h), a small 
business concern shall be counted toward one additional category goal 
only, even if that small business concern otherwise qualifies under 
more than one category goal. In this paragraph, the term `category 
goal' means a goal described in paragraph (2).''.

SEC. 206. ANNUAL PLAN FOR EACH AGENCY EXPLAINING HOW AGENCY WILL MEET 
                    SMALL BUSINESS GOALS.

Section 15(g) of the Small Business Act (15 U.S.C. 644(g)) is amended 
by adding at the end the following:
``(5) Before the beginning of each fiscal year, the head of each 
Federal agency shall submit to the Administrator of the Small Business 
Administration and to Congress a detailed plan explaining how the 
agency intends to meet the small business goals under this subsection 
that apply to that agency for that fiscal year.''.

SEC. 207. MAKING SMALL BUSINESSES THE FIRST CHOICE.

Section 15(j) of the Small Business Act (15 U.S.C. 644(j)) is amended--
    (1) in paragraph (1)--
    (A) by inserting ``or order'' after ``Each contract''; and
    (B) by striking ``$100,000'' and insert ``the Simplified 
Acquisition Threshold''; and
    (2) in paragraph (3), by striking ``subsection (a) of section 8'' 
and inserting ``section 8, 31, or 36''.

SEC. 208. UNIFORM METRIC FOR SUBCONTRACTING ACHIEVEMENTS.

Section 8(d) of the Small Business Act (15 U.S.C. 637(d)) is amended by 
adding at the end the following:.
``(12) In carrying out this subsection, the Administrator shall require 
each prime contractor to report small business subcontract usage at all 
tiers based on the percentage of the total dollar amount of the 
contract award.''.

SEC. 209. SUBCONTRACTING DATABASE.

Section 8(d) of the Small Business Act (15 U.S.C. 637(d)) is amended by 
adding at the end the following:
``(13) In carrying out this subsection, the Administrator shall develop 
and maintain a password-protected database that will enable the 
Administration to assist small businesses in marketing to large 
corporations that have not achieved their small business goals.''.

SEC. 210. NATIONAL DATABASE.

The Administrator of the Small Business Administration shall ensure 
that whenever a small business enters its information in the Central 
Contractor Registry, or any successor to that registry, the 
Administrator contacts that business within 30 days regarding the 
likelihood of Federal contracting opportunities. The Administrator 
shall ensure that each small business that so registers is, for each 
industry code entered by that small business, provided with the total 
dollar value of government contract awards to small businesses for that 
industry.

SEC. 211. REVIEW OF SUBCONTRACTING PLANS.

Not later than 120 days after the date of the enactment of this 
section, the Administrator of the Small Business Administration shall, 
after an opportunity for notice and comment, prescribe regulations to 
govern the Administrator's review of subcontracting plans, including 
standards for determining good faith effort in compliance with the 
subcontracting plans.

SEC. 212. AGENCY OBLIGATION FOR FULFILLING CONTRACTING GOALS.

Section 15(h) of the Small Business Act (15 U.S.C. 644(h)) is amended 
by adding at the end the following:
``(4) At the conclusion of each fiscal year, the head of each Federal 
agency shall submit to Congress a report specifying the percentage of 
contracts awarded by that agency for that fiscal year that were awarded 
to small business concerns. If the percentage is less than 30 percent, 
the head of the agency shall, in the report, explain why the percentage 
is less than 30 percent and what will be done to ensure that the 
percentage for the following fiscal year will not be less than 30 
percent.''.

             TITLE III--PROTECTION OF TAXPAYERS FROM FRAUD

SEC. 301. SMALL BUSINESS SIZE PROTEST NOTIFICATION.

(a) In General.--The Administrator of the Small Business Administration 
shall work with appropriate Federal agencies to ensure that whenever a 
business concern is awarded a contract on the basis that it qualifies 
as small and then is determined not to qualify as small, a notification 
of those facts (that an award was made on such a basis, and that such a 
determination was made) shall be placed adjacent to that concern's 
listing in the Central Contractor Registry (or any successor to that 
registry).
(b) Comptroller General Certification.--The Administrator shall, in 
making any report of small business goal accomplishments, qualify the 
accomplishments as ``estimated'', until the Administrator obtains from 
the Comptroller General the Comptroller General's certification that 
there are no data integrity issues with respect to the national 
repository of contract award information known as Federal Procurement 
Data System-Next Generation (FPDS-NG), or any successor to that 
repository.
(c) Awards to Large Businesses.--For each Federal agency, the Inspector 
General of that agency shall, on an annual basis, submit to Congress a 
report on the number and dollar value of contract awards that were 
coded as awards to small business concerns but in fact were made to 
businesses that did not qualify as small business concerns.

SEC. 302. REVIEW OF NATIONAL REGISTRY.

The Administrator of the Small Business Administration shall ensure, on 
a biannual basis, that an independent audit is performed of the Central 
Contractor Registry, or any successor to that registry, and that the 
Dynamic Small Business Search portion of the registry, or any successor 
to that portion of the registry, is purged of any businesses that are 
not in fact small businesses. If a business that has been so purged 
attempts, while not in fact a small business, to re-register, that 
business is subject to debarment as a Federal contractor and is further 
subject to penalties outlined in section 16 of the Small Business Act 
(15 U.S.C. 645).

SEC. 303. RECERTIFICATION OF COMPLIANCE WITH SIZE STANDARDS AND 
                    REGISTRATION WITH CENTRAL CONTRACTOR REGISTRY.

Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) is amended by 
adding at the end the following:
``(5) Recertification.--
    ``(A) In general.--If a business concern is awarded a contract 
because of a standard by which it is determined to be a small business 
concern, and the business concern is close to exceeding that standard 
at the time the award is made, then the business concern must, annually 
after the date of the award, recertify to the agency awarding the 
contract whether it meets that standard.
    ``(B) `Close to exceeding'.--For purposes of subparagraph (A), a 
business concern is close to exceeding--
    ``(i) a number-of-employees standard if the number of employees of 
the business concern is 95 percent or more of the maximum number of 
employees allowed under the standard; and
    ``(ii) a dollar-volume-of-business standard if the dollar volume of 
business is 80 percent or more of the maximum dollar volume allowed 
under the standard.
``(6) Registry.--For a business concern to be awarded a contract 
because of a standard by which it is determined to be a small business 
concern, the business concern must, annually after the end of the 
fiscal year used by the business concern, update its listing in the 
Central Contractor Registry.''.

               TITLE IV--AUTHORIZATION OF APPROPRIATIONS

SEC. 401. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated such sums as may be necessary 
to carry out this Act and the amendments made by this Act.

                        II. Purpose and Summary

    The Small Business Fairness in Contracting Act, H.R. 1873, 
amends key sections of the Small Business Act to assist small 
business participation in federal procurement. The predecessors 
to the Small Business Administration (SBA) can be traced back 
to World War II and efforts by Presidents Roosevelt and Truman 
to ensure that small businesses contributed to the maintenance 
of a robust defense industrial base. Today, the SBA is best 
known for its access to capital programs. Nevertheless, the 
genesis of the agency in government procurement is reflected in 
the Small Business Act's dictate that small business concerns 
receive a ``fair proportion of the total purchases and 
contracts for the Government in each industry category . . . 
.'' \1\ Despite this clear mandate in existence for more than 
50 years, small businesses have not received their fair share 
of federal government contracts, much less in each industry 
category. Although there are many reasons for this failure, 
H.R. 1873 adopts a measured approach to addressing some of the 
key causes for those failures. By doing so, the authors intend 
to dramatically improve on the capability of small businesses 
to earn their fair share of federal government contracts as 
mandated by the Small Business Act.
---------------------------------------------------------------------------
    \1\ Sec. 15(a) of the Small Business Act 15 U.S.C. Sec. 644(a).
---------------------------------------------------------------------------
    The bill rectifies significant contracting problems in 
three main areas: contract bundling, establishment of 
contracting goals for small businesses, and inaccuracies of 
government databases listing small business concerns. Title I 
strengthens the definition of contract bundling by closing 
loopholes in the definition, adding construction services to 
those contracts that are subject to a bundling analysis 
mandated by 15(e) of the Small Business Act,\2\ and providing a 
means by which the Administrator of the SBA may obtain an 
independent resolution of a dispute over the propriety of a 
bundled contract. Title II raises the procurement goals for 
small businesses, modifies how that overall goal is calculated, 
mandates the time-frame for negotiating the goals with each 
federal agency, and raises the threshold for set-asides of 
small business contracts to the Simplified Acquisition 
threshold of $400,000. Title II also enhances the capacity for 
small businesses to obtain a fair share of subcontracts awarded 
by large prime contractors through improved compliance with the 
subcontracting plans proffered by the prime contractors. Title 
III of the bill corrects a problem of recent origin concerning 
the accuracy of the data kept on federal procurement databases 
and the associated misreporting of firms' size status.
---------------------------------------------------------------------------
    \2\ 15 U.S.C. Sec. 644(e).
---------------------------------------------------------------------------
    The Committee does not expect that these changes will 
alleviate all the problems associated with small business 
access to federal government contracts. Nevertheless, this bill 
makes a sound start at eliminating some of the more egregious 
barriers erected that prevent small business concerns from 
achieving the goal of their fair share of federal contracts set 
forth in the Small Business Act.

                III. Background and Need for Legislation

    In 2006, the federal government spent over $417 billion on 
goods and services in 8.3 million separate contract actions. 
There is no reason to believe that the federal marketplace will 
not continue to grow at a record pace. Small businesses won 
approximately $80 billion in contracts which is about 21.5 
percent of the remaining prime contracts. The opportunity for 
free and predominantly fair competition for those contracts is 
an immensely important benefit for small businesses.
    Congress acknowledged the value of small business 
participation in federal contracting and has established 
federal policies to promote that objective for over 60 years. 
During World War II it was found to be in our national interest 
to ensure a strong and diverse industrial base. In Section 2 of 
the Small Business Act \3\ procurement goals are established as 
follows: ``it is the declared policy of the Congress that the 
Government should aid, counsel, assist and protect ... the 
interests of small business concerns in order to preserve free 
competitive enterprise and to insure that a fair proportion of 
the total purchases and contracts or subcontracts for property 
and services for the Government ... be placed with small 
business enterprises.'' Without competition, industrial 
concentration occurs and the government's purchasing options 
are dramatically reduced.
---------------------------------------------------------------------------
    \3\ 15 U.S.C. Sec. 631(a).
---------------------------------------------------------------------------
    Through a series of laws and procurement requirements 
Congress established a benchmark to give small businesses every 
opportunity to compete fairly for the award of federal 
contracts. The foundation for these efforts is the Small 
Business Act, passed in 1953, which has been steadily amended 
to adapt to meet the demands of the marketplace, to support 
important social and technological goals, and to conform to an 
increasingly sophisticated procurement system.
    In recent years, as the number of contracts grew and 
competition for lucrative federal contracts intensified, the 
process became still more complex. At the same time the federal 
government has instituted significant initiatives designed to 
streamline and centralize the procurement process which would 
lower administration costs. Unfortunately some of these 
procedures ended up artificially reducing competition. They 
also provide an advantage to large corporations that have the 
contacts and resources to operate successfully world-wide.
    The issues the bill seeks to correct include: the increased 
prevalence of contract bundling of federal contracts; the 
miscoding of large businesses as small businesses for contract 
purposes or the improper use of codes to include or exclude 
certain businesses; the exclusion of overseas and other 
categories of contracts from government small business goals 
and programs; the lack of growth in general of small business 
goals; and the need for stronger incentives and enforcement 
mechanisms to spur the attainment of small business policy and 
goals. These worsening problems need to be addressed because 
they are central to maintaining fair competition.

               BARRIERS FOR SMALL BUSINESS PARTICIPATION

    In many cases, small businesses can handily fulfill the 
basic requirements of federal contracts and beat their 
competition; in fact, lower overhead, nimbler production and 
structural efficiencies often mean they can rise to provide 
services or products at the best price. But competition is not 
always so straightforward. Small businesses might not have the 
manpower or systems to track and bid on all the opportunities 
for which they would qualify. Certain federal contracts, such 
as overseas contracts, are exempted by the SBA from small 
business goal setting, even though some small businesses would 
like to bid for those opportunities.
    Even in those cases where the law requires that certain 
contracts be set aside for competition between capable small 
businesses there are often barriers for smaller firms. For 
example, the Committee found that agencies are not doing a good 
job following the rules or ensuring all applicants are actually 
small. Also, sometimes a smaller contract to provide parts can 
disappear if it is swept into a larger contract for overall 
maintenance. Or perhaps a small bidder could win the award and 
simply turn it over to a large bidder, which in effect is a 
backdoor award to a large bidder.
    The latest figures show that federal buying of goods and 
services continues a remarkable expansion. Since 2000, the U.S. 
government's buying has expanded by nearly 60 percent to a 
record total of $340 billion in goods and services in the basic 
pool available to the small business rule. Current law requires 
the SBA to negotiate and establish contracting goals for every 
federal agency. The federal wide goal is currently 23 percent 
but SBA establishes individual agency goals that they then 
aggregate to obtain the overall 23 percent goal. One adverse 
side effect of this system is that one agency's compliance with 
the goal is used to conceal another agency's failure. A 
standard goal would provide a fixed benchmark by which to judge 
all agencies.
    Unfortunately, contracting opportunities for small 
businesses continue to lag and, because of the failure of the 
government's tracking system, are likely worse than the 
available data shows. Agencies pressed for time and budget 
dollars rely more heavily on shortcuts such as contract 
bundling and other procurement practices that shut small 
businesses out of the federal marketplace. Seven years ago this 
Committee set out to highlight individual agencies by grading 
their performance. Those grades show a system that has 
consistently gotten worse.
    Equally problematic, as evidenced by the lack of disaster 
recovery contracts going to local companies in the aftermath of 
the Gulf coast hurricanes, are efforts to expand harmful small 
business contracting practices. New methods of government 
buying that have the potential to put taxpayer money at risk 
are flourishing. Government contracts are structured so that 
the only avenue for participation by small companies is as a 
subcontractor where they are generally left to the vagaries of 
commercial contract law. Overall, small businesses continue to 
lose out on federal contracts, which have negative impacts for 
taxpayers in the form of reduced quality and increased costs.

                           CONTRACT BUNDLING

    The practice of bundling contracts--combining two or more 
contracts into a larger single package--most often ends up 
pushing small firms out of the contract competition. Congress 
responded in 1997 with provisions in the Small Business 
Reauthorization Act of 1997. The new law created its own 
problems as ways were found to skirt its requirements. The last 
ten years have illustrated that additional clarification is 
needed.
    The President's Small Business Agenda of 2002 requested 
that the Office of Management and Budget (OMB) stop the 
unnecessary bundling of contracts and required the Office of 
Federal Procurement Policy (OFPP) to develop detailed plans to 
implement this objective. In 2003, the SBA and OFPP proposed 
regulations which were finalized and published in the Federal 
Register on October 20, 2004. Shortly thereafter, the GAO 
reviewed SBA bundling processes and data and found that the 
Federal Procurement Data System (FDPS) was inaccurate because 
of confusion about the statutory definition of contract 
bundling, inadequate verification of information they were 
receiving, and ineffective controls in the FPDS reporting 
process. The Committee believes that, as a result, the 
reporting of bundling actions is wholly inadequate. In 2006, 
for example, only 43 bundlings were reported by the federal 
government even though independent studies have put the number, 
under a broader, more realistic definition at hundreds of 
thousands of contracts.\4\
---------------------------------------------------------------------------
    \4\ The Impact of Contract Building on Small Business 1992-2001; 
Office of Advocacy, SBA, 2001.
---------------------------------------------------------------------------
    Another indication to the Committee that bundling is 
increasing over the last 5 years is that despite an increase in 
total government contracting dollars of 60 percent since 2000, 
the total number of contracting actions received by small 
business has declined by 55 percent. Meanwhile, small business 
contracts continue to be phased out and combined with larger 
projects putting them beyond the reach of small firms. The 
Committee has not seen evidence that these bundled contracts 
are less expensive to taxpayers and provide higher quality 
goods and services.
    Currently, the Small Business Act (Act) defines ``Bundling 
of Contract Requirements'' as:
          [C]onsolidating 2 or more procurement requirements 
        for goods or services previously provided or performed 
        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 due 
        to--
          (A) the diversity, size, or specialized nature of the 
        elements of the performance specified;
          (B) the aggregate dollar value of the anticipated 
        award;
          (C) the geographical dispersion of the contract 
        performance sites; or
          (D) any combination of the factors described in 
        subparagraphs (A), (B), and (C).\5\
---------------------------------------------------------------------------
    \5\ Small Business Act, Sec. 3(o)(2), 15 U.S.C. 632(o)(2).
---------------------------------------------------------------------------
    The definition requires that bundling only occurs for work 
that has been performed under preexisting contracts. However, 
over the years, contracts evolve and new requirements emerge 
and this provision has resulted in limiting the contracts 
covered. In addition, construction contracts are not covered 
even though construction jobs tend to be very suitable for 
smaller, individual contracts. Very few construction jobs are 
alike because they involve a host of complex variables. 
Witnesses at the Committee's April 19, 2007 hearing testified 
that specifically including construction services in the 
definition and deleting the requirement that work have been 
previously provided or performed, will better address this 
important sector of the small business economy.

                                APPEALS

    Because of the current statutory definition of ``contract 
bundling,'' very few contracts actually receive a review to 
determine their impact on small firms. Merely adding one 
component of work that was not in the previous contract seems 
to allow an agency to avoid the analytical requirements that 
come with the determination of bundling. In the rare cases 
where bundled contracts are reviewed, the SBA is allowed under 
statute to appeal the contracting action to the agency. The Act 
currently only triggers a review of a proposed bundle when ``a 
proposed procurement includes in its statement of work goods or 
services currently being performed by a small business,'' \6\ 
and only allows bringing the issue to the attention of the 
Administrator if the Procurement Center Representative begins 
the appeal of the bundling decision. Unfortunately, these 
appeals rarely improve the likelihood that the contract will be 
unbundled. The SBA's appeal effectively asks an agency if it is 
sure it wants to proceed with the bundled contract--with the 
SBA offering arguments as to why the proposed approach would 
harm small firms. In essence, this is asking the procuring 
agency to reverse itself--a highly improbable outcome. Given 
the failure of the SBA to prevail in these appeals, the agency 
has used this option less and less.
---------------------------------------------------------------------------
    \6\ Small Business Act Sec. 15(a), 15 U.S.C. 644(a).
---------------------------------------------------------------------------
    Under current law, small businesses are allowed to protest 
the award of a bundled contract if they are harmed by it, but 
are unlikely to do so given the cost and that the agency may 
take punitive action against them as a result. Small business 
witnesses testified that being excluded from a contract 
competition because of a combination of tasks should be enough 
injury to a small business to trigger a review. However, they 
pointed out that these reviews are expensive and therefore 
might inhibit a small business from moving forward to assert 
its rights. The Committee feels that appeals should be enlarged 
to cover instances where the small business is negatively 
affected by not being able to bid on the contract. In addition, 
the business or a trade association should be able to pursue an 
appeal through the Administrator.
    Finally, a third party should be able to independently 
review the appeal as it has proved ineffective to let agencies 
review their own bundling decisions. The concept of an 
independent third party was endorsed by the small business 
witnesses who commented on the legislation.

                          SMALL BUSINESS GOALS

    Federal contracts are awarded and coded based on the 
businesses' characteristics (including small, women-owned, 
minority-owned, HUBZone and disabled veteran-owned). This 
information is collected by agencies. The federal government 
and specifically the SBA (working with the OFPP) are required 
to monitor the utilization of small businesses by federal 
agencies and compile records of compliance with federal 
contracting programs.
    The Act provides that the government wide goal for small 
business prime contracts is to be not less than 23 percent of 
the prime contracts awarded each year. The SBA negotiates and 
establishes individual goals for each federal agency and, under 
the current procedures, these awards are added across all 
federal agencies to obtain the percentage of federal prime 
contracts awarded in each category annually. Not all federal 
contracts are included in the pool of contracts on which goals 
are based; for example, contracts performed overseas are 
excluded from the tabulation. In addition to the overall prime 
contracting goal for small businesses goals are established for 
Historically Underutilized Business Zone (HUBZone) small 
businesses and Service Disabled Veteran Owned Small Businesses 
(SDVOSBs) at 3 percent each. Finally, the Act sets goals for 
small business concerns owned and controlled by socially and 
economically disadvantaged individuals (SDBs) and small 
business concerns owned and controlled by women (WOSBs) at 5 
percent.\7\
---------------------------------------------------------------------------
    \7\ Small Business Act Sec. 15(g)(1), 15 U.S.C. 644(g).
---------------------------------------------------------------------------
    If contracts won by large businesses or exempt entities are 
counted toward the small business goal, its value is inflated 
and, the Committee found, less effort is expended to bring 
competitive and real small businesses into government 
contracting. In addition, without good information policymakers 
cannot make informed decisions and the purposes of the programs 
are frustrated. The Committee has analyzed agency tabulations 
over the last 7 years (1999 through 2005) in its Scorecard 
Reports. Starting in 2002, it became apparent through this 
analysis that a significant number of the contracts were 
routinely misreported--always reflecting a higher goal 
percentage attainment than was actually achieved. Therefore, 
the Committee has recommended changes to require more accurate 
reporting and to strengthen the manner in which the data was 
reported and certified.

                               MISCODING

    In a Committee investigation, it became apparent that large 
businesses (including Fortune 500 companies) and ineligible 
entities (non-profits or state, local and federal governments) 
were receiving billions of dollars in contacts that were 
attributed to small businesses and contaminating the goal 
results. For example, in June of 2006, the SBAissued its annual 
report on federal contracting and stated that small businesses received 
25.36 percent of qualified federal prime contracts. However, a review 
of the underlying data showed the report substantially overstated the 
amount of contracts small businesses received. Further analysis showed 
that if contracts actually awarded to large corporations and other 
ineligible organizations were removed, the actual percentage of federal 
prime contracts going to small business was 21.5 percent. Approximately 
$12 billion in contract awards had been miscoded.\8\ In addition to the 
Committee's oversight efforts, the SBA Inspector General, the 
Government Accountability Office and the SBA Office of Advocacy have 
all found significant miscoding problems with the data.\9\
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    \8\ See ScoreCard VII at www.house.gov/smbiz.
    \9\ See Analysis of Type of Business Coding for the Top 1000 
Businesses Receiving Small Buainess Awards; Office of Advocacy, Small 
Business Administration submitted by Eagle Eye Publishers, Inc; 
December 2004.
---------------------------------------------------------------------------
    With the exception of a new SBA proposal that requires 
companies to recertify their business size every five years, 
very little has been done to ensure that large companies are 
not able to take advantage of small business programs through 
miscoding. The Central Contractor Registry (CCR) currently 
includes hundreds of large businesses that present themselves 
as small firms. In addition, there is no way to know that the 
new SBA regulation will work unless the list of small business 
vendors receiving contracts is audited individually to ensure 
that no large businesses or other unqualified entities are 
listed as small.

                             SUBCONTRACTING

    Subcontracting can provide an important training ground for 
small companies to familiarize themselves with the government 
contracting process. Increasingly, small firms are becoming 
subcontractors, not by choice, but by necessity. Most 
businesses, given the choice, would prefer to have their own 
contracts directly with the federal government. In this way 
they receive the full benefit of their own hard work, ingenuity 
and efficiency and enjoy federal protections and guarantees for 
payment.
    Unfortunately, subcontracting has been a very negative 
experience for some small businesses even where large amounts 
of contracting dollars were available. In the Gulf Region, for 
example, billions of dollars of cleanup work was awarded 
through four large no-bid contracts. When small businesses did 
get a piece of that work, it was most often as sub-
subcontractors for low-value tasks and for a fraction of the 
price the government was charged.
    The same is true for the recent Department of Homeland 
Security award for a $67 million ``virtual fence'' along the 
U.S. border that went to a large company. By the time small 
firms were made aware of this work, it was already awarded. At 
some point in the future, if small firms are able to 
participate, they will be relegated to subcontracts with the 
profits going mainly to the prime contractor.
    Subcontracts are commercial contracts between private 
parties. Rights accorded under federal procurement statutes 
between the government and prime contractors, such as prompt 
payment, do not apply. Disputes are resolved through 
arbitration or in costly litigation.
    Subcontracting dollars are often overstated. Prime 
contractors currently report their usage of small business 
subcontractors as a percentage of the amount of the prime 
subcontracts, as opposed to the total dollar value of the 
contract award. This practice has the result of inflating the 
amount of work that small business subcontractors are receiving 
on large federal contracts.

                          OVERSEAS CONTRACTING

    The large amount of federal dollars spent on combating 
terrorism, providing international security and resultant 
rebuilding efforts in Iraq and Afghanistan, has underscored the 
unfairness of not including overseas contracts as part of the 
base of contracts for which small businesses can compete. The 
U.S. government operates hundreds of overseas bases and 
facilities. Under its current rules the SBA does not include 
work performed overseas in the calculation of goal results. If 
foreign contract opportunities were considered, some analysts 
calculate that the actual small business prime contracting 
level is only about 19 percent of all federal contracts.\10\ 
The overseas exclusion sends the message to federal agencies 
they need not bother soliciting small companies for contracts 
performed abroad as it will not count against them for their 
goals. But many small businesses are fully capable of 
international performance and likely would bid for such 
contracts.
---------------------------------------------------------------------------
    \10\ See recent study by Paul Murphy of Eagle Eye which had small 
businesses receiving 19.3 percent of all federal prime contracts.
---------------------------------------------------------------------------
    In FY 2004, $340 billion in contracts were awarded in the 
total federal marketplace. Of these contracts, more than $6 
billion (and probably much more) was spent overseas using 
domestic U.S. corporations. Small firms received less than $122 
million of these contracts; roughly 2 percent.\11\ As a rule, 
this information is not tracked by the federal agencies that 
contract much of this work, such as the Defense Department, the 
State Department, and the U.S. Agency for International 
Development. The problem is intensified because large 
corporations rarely are required to utilize small U.S. 
businesses as subcontractors on contracts they perform for the 
U.S. abroad. A temporary fix was added last year through an 
amendment to the appropriations bill that now requires prime 
contractors to make stronger efforts to use small businesses in 
the overseas contracts of the Defense Department, with the 
exception that combat areas such as Iraq and Afghanistan 
continue to be excluded.
---------------------------------------------------------------------------
    \11\ Committee estimate based on available data. Not all such data 
is available or is kept in a form that can be tabulated.
---------------------------------------------------------------------------
    The Committee believes this policy should be recalibrated 
with a policy that advances the use of small American firms as 
prime contractors and subcontractors for work performed outside 
of U.S. territory. There may be good reasons why some contracts 
are awarded tolarge domestic companies or foreign contractors, 
but these decisions should be reviewed and publicly disclosed when 
possible. Strengthening and diversifying the international capabilities 
of our small business base would have a positive impact on our 
international competitiveness.

                              IV. Hearings

    In the 110th Congress, the full Committee on Small Business 
held a hearing on Women's Business Ownership March 21, 2007 
that examined barriers to full participation by women-owned 
business in federal contracting. Also, a significant portion of 
the Committee's hearing on the President's FY2008 budget 
proposals centered on questions raised about contracts awarded 
to large businesses that were ``miscoded'' as small businesses 
for reporting purposes. The hearing looked at the sufficiency 
of the SBA's personnel and budget requests to address the 
serious problems in small business procurement activities that 
were indicated in reports from the Inspector General, the 
Government Accountability Office, the Office of Advocacy and 
our Committee reports. A full Committee hearing was held in New 
Orleans on April 12, 2007 where the heads of six federal 
agencies testified about federal contracting to local small 
businesses in the wake of the Hurricane Katrina disaster. Most 
recently a hearing was held on April 19, 2007 on key 
contracting issues for small businesses and how H.R. 1873 would 
address those problems. Finally, the Committee held over 15 
hearings on these topics in the 107th, 108th and 109th Congress 
where the Committee found that chronic structural and 
administrative problems that created barriers to small business 
participation were increasing, rather than abating.

                       V. Committee Consideration

    The Committee on Small Business met in open session on 
April 24, 2007 to consider H.R. 1873.

                          VI. Committee Votes

    The Committee on Small Business ordered H.R. 1873 reported 
to the House, as amended by an amendment in the nature of a 
substitute, by a voice vote at 10:12 a.m.

          VII. Section-by-Section Analysis of Procurement Bill

            Sec. 1 Short title; table of contents
    This section includes a short title and the table of 
contents.
            Sec. 2 Regulations
    This section requires the SBA and the Federal Procurement 
Agencies that constitute the Federal Acquisition Rule Council 
to implement any necessary regulations within 180 days of the 
passage of this Act.
    The Committee is concerned that, often times, regulatory 
changes are not timely reflected in the Federal Acquisition 
Regulation (FAR). Because contracting officers generally 
consult the FAR when making procurement decisions, and not SBA 
regulations, it is important that the changes mandated be 
performed in a coetaneous manner. Furthermore, the Committee 
requires the regulations be issued pursuant to the 
Administrative Procedure Act to avoid any question whether 
these regulations constitute a major procurement rule under 
section 418 of the Office of Federal Procurement Policy Act.

Title I

            Sec. 101 Definitions of bundling of contract requirements 
                    and related terms
    This provision clarifies the definition of contract 
bundling and related terms. Specifically, ``bundled contract'' 
is defined as a contract or order that is entered into to meet 
requirements that are consolidated in a bundling of contract 
requirements without regard to its designation by the procuring 
agency or whether a study of the effects of the solicitation on 
civilian or military personnel has been made. ``Bundling of 
contract requirements'' is defined as the use of any bundling 
methodology to satisfy 2 or more requirements for new or 
existing goods or services, including any services for 
construction, that is likely to be unsuitable for award to a 
small business concern due to (a) the diversity, size, or 
specialized nature of the elements of the performance 
specified; (b) the aggregate dollar value of the anticipated 
award; (c) the geographical dispersion of the contract or order 
performance sites; or (d) any combination of the factors 
described in (a), (b), and (c). ``Bundling methodology'' is 
defined as a solicitation to obtain offers for a single 
contract or order, or a multiple award contract or order; a 
solicitation of offers for the issuance of a task or delivery 
order under an existing single or multiple award contract or 
order; or the creation of any new procurement requirement that 
permits a consolidation of contract or order requirements. 
Contracts under $1.5 million (or $65 million for construction), 
however, are exempted under all of these definitions. 
Additionally, contracts for solely non-commercial items, and 
contracts made up of two elements previously determined to be 
unsuitable for small business performance cannot be considered 
bundled. The Administrator will, however, be entitled to 
examine and overturn previous determinations of unsuitability. 
Finally, the term ``procurement requirement'' is defined in 
this section as ``a determination by an agency that a specified 
good or service is needed to satisfy the mission of the 
agency.''
    Under the current definition, a contract may only be 
considered bundled if it has been previously performed. This 
provision expands the definition to include construction and 
other new work. By expanding the definition, more contracts 
will be subject to a bundling review and may ultimately be 
broken into smaller parts that are better suited for small 
business performance. The dollar thresholds have been added to 
ensure that the expanded definition is not too broad. These 
dollar limits have been set at levels abovewhich that indicate 
bundling of contract requirements.\12\ This provision is not intended 
to include contracts including only one requirement, or contracts for 
goods or services that small businesses are inherently incapable of 
providing.
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    \12\ One requirement means the procurement of one good. The 
definition is not intended to exclude one requirement with indefinite 
quantity.
---------------------------------------------------------------------------
    With respect to orders, the Committee intends that not only 
contracts, but also orders such as indefinite delivery 
vehicles, requirements-type contracts, and indefinite delivery 
indefinite quantity contracts--whether single award or multiple 
award--are reviewed for potential bundling as long as the 
contracts exceed the dollar thresholds set forth in this 
section. For the following types of contracts, this review will 
occur at formation: single award, single requirement; single 
award, indefinite delivery vehicle; single award, and 
requirements. For the following types of contracts, this review 
will occur both at the time of formation and at the time of 
task order issuance: single award, indefinite delivery 
indefinite quantity; multiple award, indefinite delivery 
vehicle; multiple award, requirements; and multiple award, 
indefinite delivery indefinite quantity.
            Sec. 102 Justification
    This provision requires a Procurement Activity to provide 
the Procurement Activity's Small Business Procurement Center 
Representative with the names, addresses, and size of the 
incumbent contract holders; a description of the industries 
that might be interested in bidding on the contract 
requirements; and the number of small businesses listed in the 
industry categories that could be excluded from future bidding 
if the contract is combined or packaged. The provision also 
allows for the Administrator to intervene if no notification is 
provided, but he determines that a contract may be bundled. He 
may demand that a statement of work goods or services be 
completed by the Procurement Activity and sent to the 
Procurement Center Representative. Meanwhile, the solicitation 
process is postponed for at least 10 days to allow time for the 
Administrator's review and recommendations. Finally, the 
provision requires that justifications be made publicly 
available.
    The Committee intends this provision to close an existing 
loophole. The SBA is not presently advised of a number of 
contract bundles. This provision will allow the SBA to 
intervene in bundled contracts that the SBA becomes aware of 
even though the SBA was not originally notified of the bundle 
by the procuring agency. The justifications are intended to be 
made publicly available via the FedBizOpps website.
            Sec. 103 Appeals
    This provision allows small businesses, and trade 
organizations acting on their behalf, that are adversely 
affected, directly or indirectly, by a proposed procurement, to 
request that the SBA appeal the procurement on their behalf. 
This provision is intended to allow small businesses to protest 
procurements through trade associations, which decreases the 
financial and reputation-related burdens associated with 
protests. This is not intended to be a vehicle for 
unmeritorious claims.
            Sec. 104 Third-party review
    This provision requires the OFPP within the Office of 
Management and Budget (OMB) to decide a dispute between the SBA 
and a procuring agency with regard to contract bundling. The 
OFPP Administrator is required to render a decision not later 
than 10 days after receiving the matter. Moreover, the OFPP 
Administrator may not delegate this duty except to a 
subordinate official within OMB appointed by the President, 
with the advice and consent of the Senate.
    The Committee intends for this provision to provide an 
alternative to the current review process, which requires SBA 
to appeal to the contracting agency. As the contracting agency 
initially let the contract, it would be highly improbable to 
agree with an appeal as evidenced by the SBA's record of not 
prevailing on these appeals. A third party such as the OFPP, 
which has been authorized by Executive Order 13170, would be a 
more appropriate mediator. The ten day limit has been set to 
ensure efficiency. The Committee does not intend for the OFPP 
to become involved in every federal contract. Rather, the 
Committee intends that OFPP involvement occur only when 
agencies and SBA disagree as to the appropriateness of action. 
The Committee understands that the OFPP is not normally 
supposed to get involved in specific contract actions. However, 
the Committee believes that bundled contracts should be an 
exception given the OFPP's and OMB's numerous existing 
involvements in bundling as policy. As a result, the Committee 
intends that OFPP act to ensure that the Administration's 
policies with respect to contract bundling are being furthered.

Title II

            Sec. 201 Small business goal
    This provision raises the small business goal from 23 
percent to 30 percent. The Committee believes that this 
increase is appropriate, as the goal has not been raised in ten 
years--since 1997. In 1997, there were 23 million small 
businesses. In 2005, there were 25.8 million. Furthermore, the 
federal marketplace has expanded from $177.5 billion to over 
$300 billion. Given that, a seven percent raise seems 
reasonable. The Committee intends for this increased level to 
encourage agencies to strive for accomplishments beyond 23 
percent.
            Sec. 202 Include overseas contracts in small business goal
    This provision extends the small business goal to all 
procurement contracts without regard to whether the contract is 
for work within or outside the United States. The Committee 
intends for the small business contracting goal to apply to all 
contracts, and is concerned that certain contracts are being 
excluded from the goal calculation. By not extending the goal 
to overseas contracts, agencies have no incentive to contract 
with small businesses for this work. This provision is intended 
to afford small businessesgreater opportunity to compete for 
these contracts, and to allow agencies to apply overseas contracts 
awarded to small businesses toward their annual achievements.
            Sec. 203 Annual goal negotiation
    This provision requires the President, before the close of 
each fiscal year, to establish new Government-wide procurement 
goals for the following fiscal year for procurement contracts. 
This is intended to allow agencies to adjust their goals on an 
annual basis so that the most appropriate objective is set. The 
Committee is concerned that over the past several years, the 
administration--despite the language of the existing statute--
has engaged in biannual goal setting. By modifying the language 
of the statute, the Committee is ensuring that new goals will 
be established each year.
            Sec. 204 Goal reasonableness
    This provision requires that the annual small business 
contracting goals of each agency be not lower than the 
Government-wide goals. The Committee intends that the 
Government-wide goals serve as a floor for all individual 
agency goals. No agency may set its goals at a lower 
percentage.
            Sec. 205 Usage of small companies in goal achievement
    This provision requires that small business concerns shall 
be counted toward a maximum of one additional category, even if 
the concern otherwise qualifies under more than one category 
goal. The Committee intends for this provision to eliminate the 
problem of agencies searching for businesses that can meet as 
many criteria as possible--and for small business owners making 
decisions on the location and structure of their companies 
based on recommendations of agency personnel. This provision 
will allow any small business that qualifies in other 
categories to count once as small, and again in only one 
additional category (e.g., HUBZone, minority-owned, etc.) as 
chosen by the agency.
            Sec. 206 Annual plan for each agency explaining how agency 
                    will meet small business goals
    This provision will require the head of each Federal 
agency, before the beginning of each fiscal year, to submit to 
the Administrator and Congress, a detailed plan outlining how 
the agency intends to meet its small business goals for the 
upcoming fiscal year. The Committee expects for the agency 
leadership to be fully engaged in small business contracting 
policy. By requiring the development of an annual plan, the 
leadership will have to take a proactive role in the agency's 
commitment to small business participation in federal 
procurement.
            Sec. 207 Making small business the first choice
    This provision requires that the small business set-aside 
requirement applies not only to contracts, but also to orders. 
It will additionally require that the maximum dollar value for 
the small business threshold be raised to that of the 
Simplified Acquisition Threshold. This is intended to apply the 
set-aside requirement--known as the ``small business 
reserve''--to the Federal Supply Schedules and other 
procurement vehicles. Because these purchases are considered 
``orders'' rather than ``contracts,'' they have been previously 
exempted from certain contracting rules.
    By tying the maximum threshold to the Simplified 
Acquisition Threshold, the two limits can be adjusted for 
inflation at the same time. Additionally, the Simplified 
Acquisition Threshold allows for greater flexibility than 
having one static number covering all acquisition types.
            Sec. 208 Uniform metric for subcontracting achievement
    This provision requires prime contractors to report small 
business subcontract usage, at all tiers, based on the 
percentage of the total dollar amount of the contract award. 
The purpose of this provision is to establish a uniform metric 
for measuring subcontracting performance. The Committee intends 
to measure performance as a percentage of the total dollar 
amount rather than the dollar amount subcontracted out, or any 
other form of measurement.
            Sec. 209 Subcontracting database
    This provision requires the Administrator to develop and 
maintain a password-protected database that will enable agency 
contracting personnel to assist small businesses in marketing 
their goods and services to large corporations. The Committee 
intends for this to aid small businesses in finding 
opportunities as subcontractors. The Committee does not intend 
this database to be made available to the public or subject to 
disclosure pursuant to the Freedom of Information Act. The 
Committee expects that the SBA will use the information to 
direct small businesses to appropriate prime contractors for 
potential subcontracting opportunities.
            Sec. 210 National database
    This provision will require the Administrator to ensure 
that, whenever a small business enters its information into the 
Central Contractor Registry, or any successor to that registry, 
the SBA personnel contacts that business within 30 days 
regarding the likelihood of Federal contracting opportunities. 
Moreover, the Administrator will be required to ensure that 
each small business that so registers is, for each industry 
code entered by that small business, provided with the total 
dollar value of government contract awards to small businesses 
for that industry.
    The Committee is increasingly concerned that small 
companies are registering in the Central Contractor Registry, 
but remain unfamiliar with other federal registries such as the 
online bid listing ``Fedbizopps.'' This provision is intended 
to aid businesses wishing to contract with the federal 
government. By SBA response, firms may gain a better 
understanding of the opportunities available within their 
industry. This is not intended to require a personal response 
from the Administrator or SBA personnel. A software program 
could be used to generate an industry-specific response for 
each registrant.
            Sec. 211 Review of subcontracting plans
    This provision will require the Administrator to, after an 
opportunity for notice and comment, and not later than 120 days 
after the enactment of this section, prescribe regulations to 
govern the Administrator's review of subcontracting plans, 
including standards for determining good faith effort in 
compliance with the subcontracting plans.
    This provision is intended to ensure that subcontracting 
plans are thoroughly reviewed. A more thorough review should 
encourage the production of better-prepared subcontracting 
plans. Moreover, the Committee is concerned that although the 
Small Business Act has allowed for the assessment of liquidated 
damages against prime contractors that fail to achieve their 
small business goals since the enactment of P.L. 100-656 in 
1988, the Committee is unaware of even a single assessment. 
Primarily, this has occurred because of the requirement that 
prior to an assessment of damages an agency must demonstrate 
that the prime contractor did not put forth a good faith effort 
to comply but prime contractors are given no guidelines in what 
constitutes compliance. A rulemaking will clarify this 
provision and provide appropriate standards for measurement of 
good faith compliance.
            Sec. 212 Agency obligation for fulfilling contracting goals
    This provision requires the head of each Federal agency to 
submit a report to Congress at the conclusion of each fiscal 
year specifying the percentage of small business contracts 
awarded by that agency for that fiscal year. If the percentage 
is less than 30 percent, the head of the agency shall, in the 
report, explain why the 30 percent goal has not been met, and 
what will be done to ensure that the goal will be met for the 
following fiscal year. By requiring the heads of agencies that 
have not met the goal to formulate strategies for meeting the 
goal in the future, it increases the likelihood that agency-
wide contracting policies will be adopted with a view toward 
small business inclusion.

Title III

            Sec. 301 Small business size protest notification
    This provision requires the Administrator of the SBA to 
work with appropriate Federal agencies to ensure that whenever 
a business fails to prevail in a size protest and is determined 
to be other than small, the business is flagged as such in the 
Central Contractor Registry (or any successor to that 
registry). The provision will further require the 
Administrator, in making any report of small business goal 
accomplishments, to qualify the accomplishments as 
``estimated'' until the Administrator obtains from the 
Comptroller General's certification that there are no data 
integrity issues with respect to the national repository of 
contract award information known as Federal Procurement Data 
System--Next Generation (FPDS-NG), or any successor to that 
repository. Finally, the provision will require the 
Administrator, acting through the Inspector General, to 
annually submit a report to Congress on the number and dollar 
value of contract awards that were coded as awards to small 
business concerns but in fact were made to businesses that did 
not qualify as small business concerns.
    The Committee intends for this provision to help ensure 
that there is coordination among agencies. Currently, when a 
business loses a size protest with one agency, other agencies 
may be unaware of this, and may continue to contract with this 
business and count it as a small business towards its goal 
achievements. By requiring a notification in CCR, all agencies 
will be aware of the adverse decision.
    Moreover, requiring the Administrator to qualify 
accomplishments as ``estimated'' until the Comptroller General 
has certified the data integrity of FPDS will alleviate 
problems associated with miscoding. When agencies rely on goal 
accomplishments that have been produced with erroneous data, a 
false sense of achievement and decreased incentive to use small 
businesses may result. This provision is intended to address 
that problem.
    Lastly, the provision is intended to directly address 
miscoding by requiring the Administrator to report to Congress 
regarding miscoded contract entries. The Committee has opted to 
require the reporting through the Inspector General of each 
agency because those offices are the independent investigative 
arms of the agencies.
            Sec. 302 Review of national registry
    This provision requires the Administrator of the SBA to 
ensure, on a biannual basis, that an independent audit is 
performed of the Central Contractor Registry, or any successor 
to that registry. The Administrator will be required to ensure 
that the Dynamic Small Business Search of the registry, or any 
successor to that portion of the registry, is purged of any 
businesses that are other than small. Furthermore, any business 
that has been so purged that attempts, while not in fact a 
small business, to re-register, may be subject to debarment as 
a Federal contractor or other penalties as set forth in the FAR 
and is further subjected to penalties outlined in section 16 of 
the Small Business Act.
    The Committee intends for this provision to address the 
problem of companies incorrectly identifying themselves as 
small businesses. Inaccurate small business goal achievements 
are the result of both agencies counting large businesses as 
small, and small businesses incorrectly representing themselves 
as small. Reviewing the CCR for incorrectly listed businesses 
would address the latter issue and reduce the chances of large 
businesses trying to take advantage of small business 
opportunities.
            Sec. 303 Recertification of compliance with size standards 
                    and registration with Central Contract Registry
    This provision will require businesses that are, at the 
time of a contract award, close to exceeding their size 
standards, to annually recertify throughout the duration of the 
contract. Business concerns not close to exceeding their size 
standards will be required only to annually update their 
listings in the Central Contracting Registry. The provision 
defines ``close to exceeding'' as being within 5 percent of an 
employee-based size standard and 20 percent of a receipts-based 
size standard.
    This is intended to ensure that businesses that outgrow the 
small business classification do not remain eligible for small 
business awards for years afterwards. The Committee intends 
that only small businesses are eligible for assistance derived 
through that designation. However, a business that exceeds the 
size standard will not lose its contract. Rather, the Committee 
intends only that agencies are no longer able to take credit 
for the company as a small business.
            Sec. 401 Authorization of appropriations
    This provision authorizes to be appropriated such sums as 
may be necessary to carry out this Act and the amendments made 
by this Act.

                   VIII. Committee Estimate of Costs

    At the time of the filing of the report on H.R. 1873, the 
cost estimate of the Congressional Budget Office was not 
available. In compliance with clause 3(d)(2) of rule XIII of 
the Rules of the House of Representatives and based on the best 
information available at this time, the Committee estimates 
that, should H.R. 1873 be enacted, it would be a cost of $2.5 
million in fiscal year 2008 and $2 million each year 
thereafter. Most of the costs fall within budget function 370 
(commerce and housing credit).
    We estimate that the bill would be enacted prior to FY 2008 
and that necessary amounts will be appropriated near the start 
of each fiscal year thereafter. Accordingly we estimate the 5 
year cost from 2008 through 2012 to be $10.5 million.

                         IX. Oversight Findings

    In accordance with clause (2)(b)(1) of rule X of the Rules 
of the House of Representatives, the oversight findings and 
recommendations of the Committee on Small Business with respect 
to the subject matter contained in H.R. 1873 are incorporated 
into the descriptive portions of this report.

                X. Statement of Constitutional Authority

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

                  XI. Compliance with Public Law 104-4

    H.R. 1873 contains no unfunded mandates.

                 XII. Congressional Accountability Act

    H.R. 1873 does not relate to the terms and conditions of 
employment or access to public services or accommodations with 
the meaning of section 102(b)(3) of P.L. 104-1.

               XIII. Federal Advisory Committee Statement

    H.R. 1873 does not establish or authorize the establishment 
of any new advisory committees.

                     XIV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 1873 does not 
contain any congressional earmarks, limited tax benefits, or 
limited tariff benefits as defined in clause 9(d), 9(e), or 
9(f) of rule XXI.

                  XV. Performance Goals and Objective

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation: H.R. 1873 includes a number of provisions designed 
to update and to improve the Small Business Administration's 
procurement monitoring systems.

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

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

SMALL BUSINESS ACT

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

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  (5) Recertification.--
          (A) In general.--If a business concern is awarded a 
        contract because of a standard by which it is 
        determined to be a small business concern, and the 
        business concern is close to exceeding that standard at 
        the time the award is made, then the business concern 
        must, annually after the date of the award, recertify 
        to the agency awarding the contract whether it meets 
        that standard.
          (B) ``Close to exceeding''.--For purposes of 
        subparagraph (A), a business concern is close to 
        exceeding--
                  (i) a number-of-employees standard if the 
                number of employees of the business concern is 
                95 percent or more of the maximum number of 
                employees allowed under the standard; and
                  (ii) a dollar-volume-of-business standard if 
                the dollar volume of business is 80 percent or 
                more of the maximum dollar volume allowed under 
                the standard.
  (6) Registry.--For a business concern to be awarded a 
contract because of a standard by which it is determined to be 
a small business concern, the business concern must, annually 
after the end of the fiscal year used by the business concern, 
update its listing in the Central Contractor Registry.

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  [(o) Definitions of Bundling of Contract Requirements and 
Related Terms.--In this Act:
          [(1) Bundled contract.--The term ``bundled contract'' 
        means a contract that is entered into to meet 
        requirements that are consolidated in a bundling of 
        contract requirements.
          [(2) Bundling of contract requirements.--The term 
        ``bundling of contract requirements'' means 
        consolidating 2 or more procurement requirements for 
        goods or services previously provided or performed 
        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 due 
        to--
                  [(A) the diversity, size, or specialized 
                nature of the elements of the performance 
                specified;
                  [(B) the aggregate dollar value of the 
                anticipated award;
                  [(C) the geographical dispersion of the 
                contract performance sites; or
                  [(D) any combination of the factors described 
                in subparagraphs (A), (B), and (C).
          [(3) Separate smaller contract.--The term ``separate 
        smaller contract'', with respect to a bundling of 
        contract requirements, means a contract that has been 
        performed by 1 or more small business concerns or was 
        suitable for award to 1 or more small business 
        concerns.]
  (o) Definitions of Bundling of Contract Requirements and 
Related Terms.--For purposes of this Act:
          (1) Bundled contract.--
                  (A) In general.--The term ``bundled 
                contract'' means a contract or order that is 
                entered into to meet procurement requirements 
                that are consolidated in a bundling of contract 
                requirements, without regard to its designation 
                by the procuring agency or whether a study of 
                the effects of the solicitation on civilian or 
                military personnel has been made.
                  (B) Exceptions.--The term does not include--
                          (i) a contract or order with an 
                        aggregate dollar value below the dollar 
                        threshold specified in paragraph (4); 
                        or
                          (ii) a contract or order that is 
                        entered into to meet procurement 
                        requirements, all of which are exempted 
                        requirements under paragraph (5).
          (2) Bundling of contract requirements.--
                  (A) In general.--The term ``bundling of 
                contract requirements'' means the use of any 
                bundling methodology to satisfy 2 or more 
                procurement requirements for new or existing 
                goods or services, including any construction 
                services, that is likely to be unsuitable for 
                award to a small business concern due to--
                          (i) the diversity, size, or 
                        specialized nature of the elements of 
                        the performance specified;
                          (ii) the aggregate dollar value of 
                        the anticipated award;
                          (iii) the geographical dispersion of 
                        the contract or order performance 
                        sites; or
                          (iv) any combination of the factors 
                        described in clauses (i), (ii), and 
                        (iii).
                  (B) Exceptions.--The term does not include--
                          (i) the use of a bundling methodology 
                        for an anticipated award with an 
                        aggregate dollar value below the dollar 
                        threshold specified in paragraph (4); 
                        or
                          (ii) the use of a bundling 
                        methodology to meet procurement 
                        requirements, all of which are exempted 
                        requirements under paragraph (5).
          (3) Bundling methodology.--The term ``bundling 
        methodology'' means--
                  (A) a solicitation to obtain offers for a 
                single contract or order, or a multiple award 
                contract or order;
                  (B) a solicitation of offers for the issuance 
                of a task or a delivery order under an existing 
                single or multiple award contract or order; or
                  (C) the creation of any new procurement 
                requirement that permits a consolidation of 
                contract or order requirements.
          (4) Dollar threshold.--The term ``dollar threshold'' 
        means--
                  (A) $65,000,000, if solely for construction 
                services; and
                  (B) $1,500,000, in all other cases.
          (5) Exempted requirements.--The term ``exempted 
        requirement'' means one or more of the following:
                  (A) A procurement requirement solely for 
                items that are not commercial items (as the 
                term ``commercial item'' is defined in section 
                4(12) of the Office of Federal Procurement 
                Policy Act (41 U.S.C. 403(12))).
                  (B) A procurement requirement with respect to 
                which a determination that it is unsuitable for 
                award to a small business concern has 
                previously been made by the agency. However, 
                the Administrator shall have authority to 
                review and reverse such a determination for 
                purposes of this paragraph and, if the 
                Administrator does reverse that determination, 
                the term ``exempted requirement'' shall not 
                apply to that procurement requirement.
          (6) Procurement requirement.--The term ``procurement 
        requirement'' means a determination by an agency that a 
        specified good or service is needed to satisfy the 
        mission of the agency.

           *       *       *       *       *       *       *

  Sec. 8. (a) * * *

           *       *       *       *       *       *       *

  (d)(1) * * *

           *       *       *       *       *       *       *

  (12) In carrying out this subsection, the Administrator shall 
require each prime contractor to report small business 
subcontract usage at all tiers based on the percentage of the 
total dollar amount of the contract award.
  (13) In carrying out this subsection, the Administrator shall 
develop and maintain a password-protected database that will 
enable the Administration to assist small businesses in 
marketing to large corporations that have not achieved their 
small business goals.

           *       *       *       *       *       *       *

  Sec. 15. (a) To effectuate the purposes of this Act, small-
business concerns within the meaning of this Act shall receive 
any award or contract or any part thereof, and be awarded any 
contract for the sale of Government property, as to which it is 
determined by the Administration and the contracting 
procurement or disposal agency (1) to be in the interest of 
maintaining or mobilizing the Nation's full productive 
capacity, (2) to be in the interest of war or national defense 
programs, (3) to be in the interest of assuring that a fair 
proportion of the total purchases and contracts for property 
and services for the Government in each industry category are 
placed with small-business concerns, or (4) to be in the 
interest of assuring that a fair proportion of the total sales 
of Government property be made to small-business concerns; but 
nothing contained in this Act shall be construed to change any 
preferences or priorities established by law with respect to 
the sale of electrical power or other property by the 
Government or any agency thereof. These determinations may be 
made for individual awards or contracts or for classes of 
awards or contracts. [If a proposed procurement includes in its 
statement] If a proposed procurement would negatively affect 
one or more small business concerns, or if a proposed 
procurement includes in its statement of work goods or services 
currently being performed by a small business, and if the 
proposed procurement [is in a quantity or estimated dollar 
value the magnitude of which renders small business prime 
contract participation unlikely] would now be combined with 
other requirements for goods and services, or if a proposed 
procurement for construction seeks to package or consolidate 
discrete construction projects, or the solicitation involves an 
unnecessary or unjustified bundling of contract requirements, 
as determined by the Administration, the Procurement Activity 
shall provide a copy of the proposed procurement to the 
Procurement Activity's Small Business Procurement Center 
Representative at least 30 days prior to the solicitation's 
issuance along with a statement explaining (1) why the proposed 
acquisition cannot be divided into reasonably small lots (not 
less than economic production runs) to permit offers on 
quantities less than the total requirement, [(2) why delivery 
schedules] (2) the names, addresses and size of the incumbent 
contract holders; (3) a description of the industries that 
might be interested in bidding on the contract requirements; 
(4) the number of small businesses listed in the industry 
categories that could be excluded from future bidding if the 
contract is combined or packaged; (5) why delivery schedules 
cannot be established on a realistic basis that will encourage 
small business participation to the extent consistent with the 
actual requirements of the Government, [(3) why the proposed 
acquisition] (6) why the proposed acquisition cannot be offered 
so as to make small business participation likely, [(4) why 
construction] (7) why construction cannot be procured as 
separate discrete projects, or [(5) why the agency] (8) why the 
agency has determined that the bundled contract (as defined in 
section 3(o)) is necessary and justified. The statement shall 
also set forth the proposed procurement strategy required by 
subsection (e) and, if applicable, the specifications required 
by subsection (e)(3). Concurrently, the statement shall be made 
available to the public, including through dissemination in the 
Federal contracting opportunities database. The thirty-day 
notification process shall occur concurrently with other 
processing steps required prior to issuance of the 
solicitation. Within 15 days after receipt of the proposed 
procurement and accompanying statement, if the Procurement 
Center Representative believes that the procurement as proposed 
will render small business prime contract participation 
unlikely, the Representative shall recommend to the Procurement 
Activity alternative procurement methods which would increase 
small business prime contracting opportunities. [Whenever the 
Administration and the contracting procurement agency fail to 
agree, the matter shall be submitted for determination to the 
Secretary or the head of the appropriate department or agency 
by the Administrator.] If no notification of the procurement 
and accompanying statement is received, but the Administrator 
determines that there is cause to believe the contract combines 
requirements or a contract (single or multiple award) or task 
or delivery order for construction services or includes 
unjustified bundling, then the Administrator can demand that 
such a statement of work goods or services be completed by the 
procurement activity and sent to the Procurement Center 
Representative and the solicitation process postponed for at 
least 10 days to allow the Administrator to review the 
statement and make recommendations as described in this section 
before the procurement is continued. If a small business 
concern would be adversely affected, directly or indirectly, by 
the procurement as proposed, and that small business concern or 
a trade association on behalf of that small business concern so 
requests, the Administrator may, in the Administrator's 
discretion, take action to further the interests of that small 
business concern. Whenever the Administrator and the 
contracting procurement agency fail to agree, the Administrator 
shall submit the matter to the Administrator of the Office of 
Federal Procurement Policy within the Office of Management and 
Budget, who shall render his decision regarding the matter not 
later than 10 days after receiving the matter. For purposes of 
clause (3) of the first sentence of this subsection, an 
industry category is a discrete group of similar goods and 
services. Such groups shall be determined by the Administration 
in accordance with the definition of a ``United States 
industry'' under the North American Industry Classification 
System, as established by the Office of Management and Budget, 
except that the Administration shall limit such an industry 
category to a greater extent than provided under such 
classification codes if the Administration receives evidence 
indicating that further segmentation for purposes of this 
paragraph is warranted due to special capital equipment needs 
or special labor or geographic requirements or to recognize a 
new industry. A market for goods or services may not be 
segmented under the preceding sentence due to geographic 
requirements unless the Government typically designates the 
area where work for contracts for such goods or services is to 
be performed and Government purchases comprise the major 
portion of the entire domestic market for such goods or 
services and, due to the fixed location of facilities, high 
mobilization costs, or similar economic factors, it is 
unreasonable to expect competition from business concerns 
located outside of the general areas where such concerns are 
located. A contract may not be awarded under this subsection if 
the award of the contract would result in a cost to the 
awarding agency which exceeds a fair market price.

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  (g)(1) [The President shall annually establish Government-
wide goals for procurement contracts] The President shall 
before the close of each fiscal year establish new Government-
wide procurement goals for the following fiscal year for 
procurement contracts awarded to small business concerns, small 
business concerns owned and controlled by service disabled 
veterans, qualified HUBZone small business concerns, small 
business concerns owned and controlled by socially and 
economically disadvantaged individuals, and small business 
concerns owned and controlled by women. The Government-wide 
goal for participation by small business concerns shall be 
established at not less than [23 percent] 30 percent of the 
total value of all prime contract awards for each fiscal year. 
The Government-wide goal for participation by small business 
concerns owned and controlled by service-disabled veterans 
shall be established at not less than 3 percent of the total 
value of all prime contract and subcontract awards for each 
fiscal year. The Governmentwide goal for participation by 
qualified HUBZone small business concerns shall be established 
at not less than 1 percent of the total value of all prime 
contract awards for fiscal year 1999, not less than 1.5 percent 
of the total value of all prime contract awards for fiscal year 
2000, not less than 2 percent of the total value of all prime 
contract awards for fiscal year 2001, not less than 2.5 percent 
of the total value of all prime contract awards for fiscal year 
2002, and not less than 3 percent of the total value of all 
prime contract awards for fiscal year 2003 and each fiscal year 
thereafter. The Government-wide goal for participation by small 
business concerns owned and controlled by socially and 
economically disadvantaged individuals shall be established at 
not less than 5 percent of the total value of all prime 
contract and subcontract awards for each fiscal year. The 
Government-wide goal for participation by small business 
concerns owned and controlled by women shall be established at 
not less than 5 percent of the total value of all prime 
contract and subcontract awards for each fiscal year. 
[Notwithstanding the Government-wide goal, each agency shall 
have an annual goal] Each agency shall have an annual goal, not 
lower than the Government-wide goal, that presents, for that 
agency, the maximum practicable opportunity for small business 
concerns, small business concerns owned and controlled by 
service-disabled veterans, qualified HUBZone small business 
concerns, small business concerns owned and controlled by 
socially and economically disadvantaged individuals, and small 
business concerns owned and controlled by women to participate 
in the performance of contracts let by such agency. The 
Administration and the Administrator of the Office of Federal 
Procurement Policy shall, when exercising their authority 
pursuant to paragraph (2), insure that the cumulative annual 
prime contract goals for all agencies meet or exceed the annual 
Government-wide prime contract goal established by the 
President pursuant to this paragraph.

           *       *       *       *       *       *       *

  (3) The procurement goals required by this subsection apply 
to all procurement contracts, without regard to whether the 
contract is for work within or outside the United States.
  (4) For purposes of this subsection and subsection (h), a 
small business concern shall be counted toward one additional 
category goal only, even if that small business concern 
otherwise qualifies under more than one category goal. In this 
paragraph, the term ``category goal'' means a goal described in 
paragraph (2).
  (5) Before the beginning of each fiscal year, the head of 
each Federal agency shall submit to the Administrator of the 
Small Business Administration and to Congress a detailed plan 
explaining how the agency intends to meet the small business 
goals under this subsection that apply to that agency for that 
fiscal year.
  (h)(1) * * *

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  (4) At the conclusion of each fiscal year, the head of each 
Federal agency shall submit to Congress a report specifying the 
percentage of contracts awarded by that agency for that fiscal 
year that were awarded to small business concerns. If the 
percentage is less than 30 percent, the head of the agency 
shall, in the report, explain why the percentage is less than 
30 percent and what will be done to ensure that the percentage 
for the following fiscal year will not be less than 30 percent.

           *       *       *       *       *       *       *

  (j)(1) Each contract or order for the purchase of goods and 
services that has an anticipated value greater than $2,500 but 
not greater than [$100,000] the Simplified Acquisition 
Threshold shall be reserved exclusively for small business 
concerns unless the contracting officer is unable to obtain 
offers from two or more small business concerns that are 
competitive with market prices and are competitive with regard 
to the quality and delivery of the goods or services being 
purchased.

           *       *       *       *       *       *       *

  (3) Nothing in paragraph (1) shall be construed as precluding 
an award of a contract with a value not greater than $100,000 
under the authority of [subsection (a) of section 8] section 8, 
31, or 36 of this Act, section 2323 of title 10, United States 
Code, section 712 of the Business Opportunity Development 
Reform Act of 1988 (Public Law 100-656; 15 U.S.C. 644 note), or 
section 7102 of the Federal Acquisition Streamlining Act of 
1994.

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