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110th Congress                                            Rept. 110-111
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 3

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



 
               SMALL BUSINESS FAIRNESS IN CONTRACTING ACT

                                _______
                                

                  May 8, 2007.--Ordered to be printed

                                _______
                                

  Mr. Waxman, from the Committee on Oversight and Government Reform, 
                        submitted the following

                          SUPPLEMENTAL REPORT

                        [To accompany H.R. 1873]

    This supplemental report shows the cost estimate of the 
Congressional Budget Office with respect to the bill (H.R. 
1873), as reported, which was not included in part 2 of the 
report submitted by the Committee on Oversight and Government 
Reform on May 3, 2007 (H. Rept. 110-111, pt. 2).

               Congressional Budget Office Cost Estimate

                                                       May 7, 2007.
Hon. Henry A. Waxman,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed estimate for H.R. 1873, the Small 
Business Fairness in Contracting Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 1873--Small Business Fairness in Contracting Act

    Summary: H.R. 1873 would make several changes to the laws 
that promote and encourage federal agencies to contract for 
goods and services with small businesses, The legislation would 
amend the definition of ``bundled contracts'' (the practice of 
combining two or more contracts into a single agreement) for 
the procurement of goods and services and require agencies to 
better justify the need for such larger contracts rather than 
smaller ones that could be available to small businesses. The 
federal government currently has a goal of acquiring 23 percent 
of most goods and services from small business. The bill would 
increase that goal to 25 percent. H.R. 1873 also would require 
the Small Business Administration (SBA) to develop new 
regulations and new databases and to conduct other efforts to 
encourage and promote the use of small businesses in government 
contracting.
    CBO estimates that implementing H.R. 1873 would cost $10 
million in fiscal year 2008 and $75 million over the 2008-2012 
period, subject to the availability of appropriated funds. 
Enacting the bill would not affect direct spending or revenues.
    The legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA) and would not affect the budgets of state, local, or 
tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1873 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit) and all other budget functions 
that include spending to procure goods and services.

------------------------------------------------------------------------
                                      By fiscal year, in millions of
                                                 dollars--
                                 ---------------------------------------
                                   2008    2009    2010    2011    2012
------------------------------------------------------------------------
              CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Administration of Governmentwide
 Procurement:
    Estimated Authorization           10      10      15      15      15
     Level......................
    Estimated Outlays...........       8      10      15      15      15
Small Business Administration:
    Estimated Authorization            2       2       2       2       2
     Level......................
    Estimated Outlays...........       2       2       2       2       2
Total Changes:
    Estimated Authorization           12      12      17      17      17
     Level......................
    Estimated Outlays...........      10      12      17      17      17
------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that H.R. 
1873 will be enacted near the end of fiscal year 2007, that the 
necessary amount will be appropriated over the 2008-2012 
period, and that outlays will follow historical spending 
patterns for contract administration spending. CBO estimates 
that implementing H.R. 1873 would cost $10 million in 2008 an 
$75 million over the 2008-2012 period, assuming appropriation 
of the necessary funds.

Administration of governmentwide procurement

    H.R. 1873 would amend the definition of ``bundled 
contracts'' to restrict the bundling of contracts that were 
formerly performed by small business with exemptions for the 
procurement of goods and services with a value of at least $5 
million and construction projects worth more than $65 million. 
Under the bill, agencies would have to justify the use of 
bundled contracts by evaluating whether or not such work could 
be performed by small businesses. The SBA could appeal to the 
agency to determine whether the use of bundled contracts by an 
agency is justified and inform appropriate Congressional 
committees of its findings. In addition, H.R. 1873 would amend 
current law to increase the goal of using contracts with small 
businesses from the current governmentwide goal of 23 percent 
of the value of all government contracts to 25 percent. The 
legislation also would increase the goal for contracts with 
disadvantaged and women-owned business from 5 percent of the 
value of all government contracts to 8 percent.
    Recent SBA procurement reports indicate that the federal 
government is contracting for about 25 percent of all goods and 
services it obtains from small businesses, consequently CBO 
expects that the new goal in the bill would not significantly 
change agencies' behavior or add to administrative costs for 
procuring goods and services.
    CBO estimates that about 30,000 federal employees are 
responsible for administering the procurement of goods and 
services for the government at a cost of about $2.5 billion a 
year. Based on information from agencies with the most 
procurement spending and an analysis of SBA reports on 
governmentwide and small business contracts, CBO expects that, 
to implement the bill, agencies would incur additional 
discretionary costs to justify the use of contract bundling and 
to encourage the use of disadvantaged and women-owned small 
businesses. Additional costs would be incurred to review and 
analyze the need for bundled contracts, prepare additional 
market research to identify small business concerns able to 
perform government contracts and provide necessary products, 
and expand existing mentoring and developmental programs to 
prepare disadvantaged and women-owned small businesses to 
obtain government procurement opportunities. CBO estimates that 
complying with the requirements and goals in H.R. 1873 would 
increase administrative costs by about $15 million annually, or 
1 percent of the $2.5 billion that CBO estimates is spent to 
administer the government's procurement contracting efforts.

Small Business Administration

    Several provisions of H.R. 1873 would increase the 
responsibilities of the SBA to monitor and support small 
business preferences in government contracting and procurement. 
This would include reviewing bundled contracts and auditing 
contractor databases. Based on information from SBA, CBO 
estimates that those provisions would cost about $2 million per 
year.
    Intergovernmental and private-sector impact: H.R. 1873 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Previous CBO estimate: On May 4, 2007, CBO transmitted a 
cost estimate for H.R. 1873 as reported by the House Committee 
on Small Business on May 1, 2007. The version of the bill 
reported by the House Committee on Small Business would provide 
more opportunities to review the use of bundled contracts and 
would significantly increase the goal of using small businesses 
to fulfill government contracts to 30 percent. The Small 
Business Committee version of the bill also would apply this 
goal to each agency individually. Consequently, CBO estimates 
that the Small Business Committee version of the legislation 
would be more costly to implement than the version of the 
legislation ordered by the House Committee on Oversight and 
Government Reform.
    Estimate prepared by: Federal costs: Matthew Pickford and 
Susan Willie. Impact on State, local, and tribal Governments: 
Elizabeth Cove. Impact on the private sector: Craig Cammarata.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.