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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
[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
Peter R. Orszag.
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
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
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
2008 2009 2010 2011 2012
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Administration of Governmentwide
Estimated Authorization 10 10 15 15 15
Estimated Outlays........... 8 10 15 15 15
Small Business Administration:
Estimated Authorization 2 2 2 2 2
Estimated Outlays........... 2 2 2 2 2
Estimated Authorization 12 12 17 17 17
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
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
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.