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112th Congress                                            Rept. 112-721
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

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



 
                  SMALL BUSINESS ADVOCATE ACT OF 2012

                                _______
                                

 December 21, 2012.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Graves of Missouri, from the Committee on Small Business, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 3851]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 3851) to amend the Small Business Act with respect 
to Offices of Small and Disadvantaged Business Utilization, and 
for other purposes, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
  I. Amendment........................................................1
 II. Purpose of the Bill and Summary..................................3
III. Background and the Need for Legislation..........................4
 IV. Hearings.........................................................8
  V. Committee Consideration..........................................8
 VI. Committee Votes..................................................9
VII. Section-by-Section Analysis of H.R. 3851........................11
VIII.Unfunded Mandates...............................................15

 IX. New Budget Authority, Entitlement Authority, and Tax Expenditure15
  X. Oversight Findings..............................................15
 XI. Statement of Constitutional Authority...........................15
XII. Congressional Accountability Act................................15
XIII.Federal Advisory Committee Statement............................15

XIV. Statement of No Earmarks........................................15
 XV. Performance Goals and Objectives................................16
XVI. Changes in Existing Law Made by the Bill, as Reported...........16

                              I. Amendment

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

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Small Business Advocate Act of 2012''.

SEC. 2. OFFICES OF SMALL AND DISADVANTAGED BUSINESS UTILIZATION.

  (a) Appointment and Position of Director.--Section 15(k)(2) of the 
Small Business Act (15 U.S.C. 644(k)(2)) is amended by striking ``such 
agency,'' and inserting ``such agency to a position that is a Senior 
Executive Service position (as such term is defined under section 
3132(a) of title 5, United States Code), except that, for any agency in 
which the positions of Chief Acquisition Officer and senior procurement 
executive (as such terms are defined under section 44(a) of this Act) 
are not Senior Executive Service positions, the Director of Small and 
Disadvantaged Business Utilization may be appointed to a position 
compensated at not less than the minimum rate of basic pay payable for 
grade GS-15 of the General Schedule under section 5332 of such title 
(including comparability payments under section 5304 of such title);''.
  (b) Performance Appraisals.--Section 15(k)(3) of such Act (15 U.S.C. 
644(k)(3)) is amended--
          (1) by striking ``be responsible only to, and report directly 
        to, the head'' and inserting ``shall be responsible only to 
        (including with respect to performance appraisals), and report 
        directly and exclusively to, the head''; and
          (2) by striking ``be responsible only to, and report directly 
        to, such Secretary'' and inserting ``be responsible only to 
        (including with respect to performance appraisals), and report 
        directly and exclusively to, such Secretary''.
  (c) Small Business Technical Advisers.--Section 15(k)(8)(B) of such 
Act (15 U.S.C. 644(k)(8)(B)) is amended--
          (1) by striking ``and 15 of this Act,'' and inserting ``, 15, 
        and 44 of this Act;''; and
          (2) by inserting after ``of this Act'' the following: 
        ``(giving priority in assigning to small business that are in 
        metropolitan statistical areas for which the unemployment rate 
        is higher than the national average unemployment rate for the 
        United States)''.
  (d) Additional Requirements.--Section 15(k) of such Act (15 U.S.C. 
644(k)) is amended by inserting after paragraph (10) the following:
          ``(11) shall review and advise such agency on any decision to 
        convert an activity performed by a small business concern to an 
        activity performed by a Federal employee;
          ``(12) shall provide to the Chief Acquisition Officer and 
        senior procurement executive of such agency advice and comments 
        on acquisition strategies, market research, and justifications 
        related to section 44 of this Act;
          ``(13) may provide training to small business concerns and 
        contract specialists, except that such training may only be 
        provided to the extent that the training does not interfere 
        with the Director carrying out other responsibilities under 
        this subsection;
          ``(14) shall carry out exclusively the duties enumerated in 
        this Act, and shall, while the Director, not hold any other 
        title, position, or responsibility, except as necessary to 
        carry out responsibilities under this subsection; and
          ``(15) shall submit, each fiscal year, to the Committee on 
        Small Business of the House of Representatives and the 
        Committee on Small Business and Entrepreneurship of the Senate 
        a report describing--
                  ``(A) the training provided by the Director under 
                paragraph (13) in the most recently completed fiscal 
                year;
                  ``(B) the percentage of the budget of the Director 
                used for such training in the most recently completed 
                fiscal year; and
                  ``(C) the percentage of the budget of the Director 
                used for travel in the most recently completed fiscal 
                year.''.
  (e) Requirement of Contracting Experience for OSDBU Director.--
Section 15(k) of the Small Business Act (15 U.S.C. 644(k)), as amended 
by this Act, is further amended, in the matter preceding paragraph (1), 
by striking ``who shall'' and insert the following: ``, with at least 
10 years of experience serving in any combination of the following 
roles: federal contracting officer, small business technical advisor, 
contracts administrator for federal government contracts, attorney 
specializing in federal procurement law, small business liaison 
officer, officer or employee who managed federal government contracts 
for a small business, or individual whose primary responsibilities were 
for the functions and duties of section 8, 15 or 44 of this Act. Such 
officer or employee''.
  (f) Technical Amendments.--Section 15(k) of such Act (15 U.S.C. 
644(k)), as amended, is further amended--
          (1) in paragraph (1)--
                  (A) by striking ``be known'' and inserting ``shall be 
                known''; and
                  (B) by striking ``such agency,'' and inserting ``such 
                agency;'';
          (2) in paragraph (2) by striking ``be appointed by'' and 
        inserting ``shall be appointed by'';
          (3) in paragraph (3)--
                  (A) by striking ``director'' and inserting 
                ``Director''; and
                  (B) by striking ``Secretary's designee,'' and 
                inserting ``Secretary's designee;'';
          (4) in paragraph (4)--
                  (A) by striking ``be responsible'' and inserting 
                ``shall be responsible''; and
                  (B) by striking ``such agency,'' and inserting ``such 
                agency;'';
          (5) in paragraph (5) by striking ``identify proposed'' and 
        inserting ``shall identify proposed'';
          (6) in paragraph (6) by striking ``assist small'' and 
        inserting ``shall assist small'';
          (7) in paragraph (7)--
                  (A) by striking ``have supervisory'' and inserting 
                ``shall have supervisory''; and
                  (B) by striking ``this Act,'' and inserting ``this 
                Act;'';
          (8) in paragraph (8)--
                  (A) by striking ``assign a'' and inserting ``shall 
                assign a''; and
                  (B) in subparagraph (A), by striking ``the activity, 
                and'' and inserting ``the activity; and'';
          (9) in paragraph (9)--
                  (A) by striking ``cooperate, and'' and inserting 
                ``shall cooperate, and''; and
                  (B) by striking ``subsection, and'' and inserting 
                ``subsection;''; and
          (10) in paragraph (10)--
                  (A) by striking ``make recommendations'' and 
                inserting ``shall make recommendations'';
                  (B) by striking ``subsection (a), or section'' and 
                inserting ``subsection (a), section'';
                  (C) by striking ``Act or section 2323'' and inserting 
                ``Act, or section 2323'';
                  (D) by striking ``Code. Such recommendations shall'' 
                and inserting ``Code, which shall''; and
                  (E) by striking ``contract file.'' and inserting 
                ``contract file;''.

SEC. 3. SMALL BUSINESS PROCUREMENT ADVISORY COUNCIL.

  (a) Duties.--Section 7104(b) of the Federal Acquisition Streamlining 
Act of 1994 (15 U.S.C. 644 note) is amended--
          (1) in paragraph (1) by striking ``and'' at the end;
          (2) in paragraph (2) by striking ``authorities.'' and 
        inserting ``authorities;''; and
          (3) by adding at the end the following:
          ``(3) to conduct reviews of each Office of Small and 
        Disadvantaged Business Utilization established under section 
        15(k) of the Small Business Act (15 U.S.C. 644(k)) to determine 
        the compliance of each Office with requirements under such 
        section;
          ``(4) to identify best practices for maximizing small 
        business utilization in Federal contracting that may be 
        implemented by Federal agencies having procurement powers; and
          ``(5) to submit, annually, to the Committee on Small Business 
        of the House of Representatives and the Committee on Small 
        Business and Entrepreneurship of the Senate a report 
        describing--
                  ``(A) the comments submitted under paragraph (2) 
                during the 1-year period ending on the date on which 
                the report is submitted, including any outcomes related 
                to the comments;
                  ``(B) the results of reviews conducted under 
                paragraph (3) during such 1-year period; and
                  ``(C) best practices identified under paragraph (4) 
                during such 1-year period.''.
  (b) Membership.--Section 7104(c)(3) of such Act (15 U.S.C. 644 note) 
is amended by striking ``(established under section 15(k) of the Small 
Business Act (15 U.S.C. 644(k))''.
  (c) Chairman.--Section 7104(d) of such Act (15 U.S.C. 644 note) is 
amended by inserting after ``Small Business Administration'' the 
following: ``(or the designee of the Administrator)''.

                      II. Purpose and Bill Summary

    H.R. 3851, the ``Small Business Advocate Act of 2012,'' 
amends the Small Business Act (the Act) in order to improve the 
effectiveness of the Offices of Small and Disadvantaged 
Business Utilization (OSDBUs) within each federal agency. In 
turn, this should increase prime contracting and subcontracting 
opportunities for small businesses.
    Ultimately, more effective OSDBUs will ensure that the 
goals set forth in H.R. 3850 will be achieved. Small business 
contractors bring necessary competition to the government 
marketplace, add innovation, and create new jobs. Despite these 
benefits to the government and taxpayers, there are significant 
barriers to entry for small businesses in the federal 
marketplace that favor large businesses. Congress created the 
OSDBUs to help break down these barriers. OSDBUs prevent 
contract bundling, ensure prompt payment, and increase the use 
of small businesses as prime contractors. However, the 
Committee's own investigations and reports by the Government 
Accountability Office (GAO) have highlighted areas in the law 
that need to be addressed if the OSDBUs are to be effective 
advocates for small businesses.
    H.R. 3851 increases the effectiveness of the OSDBUs by 
improving the leadership of the offices, expanding the 
responsibilities of the OSDBUs, and improving the functionality 
of the Small Business Procurement Advisory Council (SBPAC). The 
bill places the directors on par with the senior procurement 
officials within the agency, so that they may negotiate as 
equals. H.R. 3851 requires that the directors have a base level 
of experience in federal procurement so that they will be 
qualified advocates. The bill also requires that the job of 
OSDBU director be treated as a full-time position, rather than 
being just an additional title assigned to the Chief Financial 
Officer, the Chief Acquisition Officer or some other official. 
This will ensure that top level attention is being paid to 
small business participation in federal procurement.
    The bill expands the responsibilities of the OSDBUs to 
reflect changes in procurement law. OSDBUs will be required to 
proffer their opinion on the conversion of work from 
performance by a small business to work performed by federal 
employees. H.R. 3851 also requires that the OSDBUs advise and 
comment on acquisition strategies, including those resulting in 
contract bundling and consolidation. The OSDBUs are allowed to 
provide training to small businesses and contract specialists, 
as long as it does not interfere with their core advocacy 
responsibilities.
    Finally, the bill improves the way the OSDBUs work together 
by reforming the SBPAC. Pursuant to the revisions, the OSDBUs 
would regularly assess each other's compliance with the 
requirements of the Act. Reformation of the SBPAC will help 
ensure that OSDBUs develop best practices for increasing small 
business participation in federal procurement and strengthen 
their ability to advocate on behalf of small businesses in the 
development of federal acquisition regulations.

                III. Background and Need for Legislation


                          A. ROLE OF DIRECTOR

    Prior to 1978, small business advocates within contracting 
agencies lacked the stature to truly promote small business 
utilization. Indeed, the Committee on Small Business of the 
Senate found that ``many are located in the lower echelons of 
the bureaucracy and, therefore, are unable to advocate or 
effectively assist in the procurement of contracts for small 
business.''\1\ Thus, in 1978, section 15(k) of Act was added to 
require that all federal agencies with procurement powers 
establish an OSDBU to advocate for small businesses.\2\ Section 
15(k)(3) requires that OSDBU directors, with the exception of 
the Department of Defense, ``be responsible only to, and report 
directly to, the head of such agency or to the deputy of such 
head.''\3\ To explain this choice, the Committee on Small 
Business of the Senate stated:
---------------------------------------------------------------------------
    \1\S. Rep. No. 95-1070, at 18 (1978).
    \2\Act of October 24, 1978, Pub. L. No. 95-507, ch. 3, Sec. 221, 92 
Stat. 1757, 1771.
    \3\15 U.S.C. Sec. 644(k)(3).

          The committee believes that small business 
        procurement officers must have direct access to top 
        level agency policymakers to improve their 
        effectiveness as small business advocates. These 
        amendments thus establish the position of Director, 
        [OSDBU] in all federal procuring agencies. These 
        directors would report directly to the agency head or 
        an official . . . one level of responsibility lower 
        than the agency head. Creation of these offices is 
        central to the goal of the Small Business Act which 
        directs that small businesses receive a fair portion of 
        Federal procurement through vigorous action on the part 
        of Federal departments and agencies.\4\
---------------------------------------------------------------------------
    \4\S. Rep. No. 95-1070 at 18.

    More than 30 years after Congress mandated direct reports 
to the head or deputy of the agency, OSDBUS frequently remain 
mired in the bowels of the bureaucracy. The GAO examined 16 
agencies--seven agencies that each procured more than $15 
billion in goods and services in 2009, and nine that GAO had 
previously reported had reporting schemes that were not 
complying with the Act.\5\ Of these sixteen agencies, seven 
were found to be noncompliant--the Departments of Agriculture, 
Commerce, Interior, Justice, State and Treasury and the Social 
Security Administration.\6\ These same seven agencies were also 
found to be noncompliant in 2003.\7\
---------------------------------------------------------------------------
    \5\Id. at 3. The seven $15 billion agencies were the Defense 
Logistics Agency, NASA, and the Departments of the Army, Air Force, 
Navy, Energy, and Health and Human Services. The additional nine 
agencies were the Environmental Protection Agency, Social Security 
Administration, and the Departments of Education, Agriculture, 
Commerce, Justice, Interior and Treasury. DOI, and Treasury.
    \6\Id.
    \7\GAO, Small and Disadvantaged Businesses: Some Agencies' 
Advocates Do Not Report to the Required Management Level (2003).
---------------------------------------------------------------------------
    Of these agencies, the OSDBU directors at the Departments 
of Commerce, Interior, and Justice, and the Social Security 
Administration reported to lower level officials. These 
officials were also the Chief Acquisition Officers (CAOs)\8\ or 
their deputies within the agencies. At the remaining three 
agencies, the OSDBU director in title and the OSDBU director in 
fact varied.\9\ In each case, the CAO was also the official 
OSDBU,\10\ with a lower level employee as the ``de facto 
OSDBU.''\11\ This creates a significant conflict of interest 
between the CAO's support for a particular acquisition strategy 
and the OSDBU's advocacy for a pro-small business agenda for a 
particular procurement.\12\ This conflict is exacerbated when 
the OSDBU must appeal procurement in an effort to garner more 
small business participation. Such an appeal has little chance 
of success if there is not a division in authorities between 
the OSDBU director and the CAO.
---------------------------------------------------------------------------
    \8\CAOs are political appointees and the most senior official 
within each agency responsible for the acquisition activities programs. 
The CAO may be the Senior Procurement Executive (SPE) of the agency, or 
has direct responsibility of that individual. By statute, CAOs must be 
members of the Senior Executive Service or Senate-confirmed. Per 41 
U.S.C. 1702, SPEs are responsible for management direction of the 
procurement system of the executive agency, including implementation of 
the unique procurement policies, regulations, and standards of the 
executive agency.
    \9\Small Business Contracting at 48.
    \10\The CAOC Council Membership List is available at http://
www.caoc.gov/index.cfm? function=membersall.
    \11\Small Business Contracting at 48.
    \12\Meeting this goal means limiting competition through the 
programs of the Act, for which the director is specifically responsible 
under section 15(k)(4). Simultaneously, as CAO, the individual was 
required to have acquisition management as his primary responsibility, 
and shall ``(2) increasing the use of full and open competition in the 
acquisition of property and services by the executive agency.'' 41 
U.S.C. Sec. 414(b)(2). Thus, having the same individual fill both roles 
left the official OSDBU charged with both increasing and decreasing the 
use of set-asides--a mathematical impossibility--and with being a check 
on himself. Alternatively, if the OSDBU director was a lower level 
official, the individual invariably reported to and was reviewed by the 
CAO. Thus, the person responsible for increasing the use of set-aside 
contracts was overseen by the person charged with decreasing the use of 
set-aside contracts. This also meant that any protests the OSDBU 
director made of contracting decisions went not to the Deputy Secretary 
but to the CAO--the very individual ultimately responsible for making 
the contracting decisions. Such a reporting structure is untenable. The 
Committee leaves the question of whether officials serving as CAO 
actually have acquisition management as their primary function to the 
Committee on Oversight and Government Reform.
---------------------------------------------------------------------------
    After the GAO report was released, the Chairman of the 
Subcommittee on Contracting and the Workforce, Mick Mulvaney, 
sent letters to each of the noncompliant agencies asking the 
Secretaries for their plans to bring the departments into 
compliance with the Act.\13\ The Social Security Administration 
promptly changed its reporting structure, but each of the other 
agency responses asserted that the agencies were indeed in 
compliance with the Act. The Secretaries or Deputy Secretaries 
were then invited to appear before the Subcommittee to explain 
why they believed they were in compliance and all declined to 
appear. Consequently, on October 20, 2011, the Committee issued 
subpoenas to compel the attendance of the Deputy Secretaries 
for the Department of Agriculture, State, and Treasury, as well 
as for the Deputy Attorney General.\14\
---------------------------------------------------------------------------
    \13\Copies of the letters are on file with the Committee.
    \14\Copies of the subpoenas are on file with the Committee. 
Commerce and Interior were not subpoenaed at that time, because 
Commerce had an acting Secretary and acting Deputy Secretary, and 
Interior had offered to change its reporting structure. Interior has 
since changed its reporting structure to mirror the reporting 
structures that GAO found noncompliant at Agriculture, State, and 
Treasury. The Subcommittee is continuing to work with these agencies to 
resolve their reporting deficiencies, and may hold future hearings with 
these witnesses.
---------------------------------------------------------------------------
    Throughout this process, the Committee was routinely 
informed by the agencies that the OSDBU director need not 
personally perform the function set out in Sec. 15(k). 
Additionally, the agencies asserted that it was inappropriate 
to have employees who were not members of the Senior Executive 
Service\15\ reporting directly to the Deputy Secretary of an 
agency. Given the recalcitrance by the agencies, the Committee 
had no alternative but to legislation changes. H.R. 3851 is the 
result and clarifies the duties and reporting structure of the 
OSDBU to eliminate confusion created by existing agency 
interpretations of Sec. 15(k) of the Act.
---------------------------------------------------------------------------
    \15\Members of the Senior Executive Service (SES), are federal 
employees serving in political and career managerial, supervisory, and 
policy positions classified above civil service's General Schedule 
grade 15 or equivalent positions in the Executive Branch. 5 U.S.C. 
Sec. 3132(a). For 2012, these positions pay a base salary between 
$119,554 and $179,700, and with bonuses may receive compensation up to 
$230,700. Id. at Sec. 5307.
---------------------------------------------------------------------------

                            B. ROLE OF OSDBU

    The OSDBU is responsible for implementation and execution 
of contracting assistance-related functions and duties in the 
Act. This includes the small business set-aside program and 
other socio-economic contracting programs, as well as assisting 
small businesses in obtaining payments and late payment 
interest from their agency or from prime contractors. The 
primary focus of the OSDBU should be advocating for small 
business contracts, and ``the failure of the contracting 
officer to accept any such recommendations shall be documented 
and included within the appropriate contract file.''\16\
---------------------------------------------------------------------------
    \16\Id. at Sec. 644.
---------------------------------------------------------------------------
    The OSDBUs are specifically charged with fighting 
unjustified bundling. Contract bundling occurs when two or more 
requirements of a type that would be suitable for award to 
small business are consolidated into a larger contract 
requirement that is no longer suitable for award to small 
business. Due to concerns regarding limiting competition and 
excluding small business participation, the Act has very 
specific procedures agencies must follow in order to justify 
bundling, and the OSDBUs are a critical part of this process. 
Specifically, the Act directs them to ``identify proposed 
solicitations that involve significant bundling of contract 
requirements.''\17\ When bundled requirements are identified, 
the OSDBU is to ``work with the agency acquisition officials 
and the [SBA] to revise the procurement strategies for such 
proposed solicitations where appropriate to increase the 
probability of participation by small businesses as prime 
contractors, or to facilitate small business participation as 
subcontractors and suppliers.''\18\
---------------------------------------------------------------------------
    \17\Id. at Sec. 644(k)(5).
    \18\Id. at Sec. 644(k)(5).
---------------------------------------------------------------------------
    Given the scope of their task, the Act grants the OSDBUs 
resources and authority, and tasks them to cooperate with SBA. 
This includes having supervisory authority over personnel 
carrying out the functions of the Small Business Act.\19\ To 
assist SBA OSDBUs are required to assign small business 
technical advisors to each Small Business Administration (SBA) 
Procurement Center Representative (PCR) and the OSDBUs are 
directed to ``cooperate, and consult on a regular basis, with 
the [SBA] with respect to carrying out the functions and 
duties'' vested in them by the Act.\20\
---------------------------------------------------------------------------
    \19\Id. at Sec. 644(k)(7).
    \20\Id. at Sec. 644(k)(9).
---------------------------------------------------------------------------
    In addition to the responsibilities mandated by statute, 
OSDBUS, through their own initiative, have taken on additional 
duties in an effort to meet with the evolving nature of federal 
procurement.\21\
---------------------------------------------------------------------------
    \21\Since the creation of the OSDBUs, there have been three major 
pieces of federal procurement legislation: 1) the Competition in 
Contracting Act; The Federal Acquisition Reform Act, and the Federal 
Acquisition Streamlining Act. In addition, the Federal Acquisition 
Regulation was promulgated in 1984. Finally, federal procurement has 
grown from less than $100 billion annually to $538 billion in FY 2010.
---------------------------------------------------------------------------
    Additionally, while the input of the OSDBU on proposed 
solicitations, as authorized by section 15(k)(5) of the Act, 
remains useful, it is simply not as relevant as it was in 1978. 
Now, by the time an acquisition reaches the proposed 
solicitation stage, many months if not years of work have taken 
place. Changes to the proposed solicitation in these cases 
carry with them very real costs and delays. However, by 
involving the OSDBU in the initial acquisition planning 
process, the Committee believes that OSDBU involvement will be 
more collaborative and productive.

       C. ROLE OF THE SMALL BUSINESS PROCUREMENT ADVISORY COUNCIL

    Section 7104 of the Federal Acquisition Streamlining Act of 
1994 created an interagency SBPAC to develop positions on 
proposed procurement regulations affecting the small business 
community and submit comments reflecting such positions to 
appropriate regulatory authorities. The SBPAC is chaired by 
SBA, with each of the OSDBUs and the Administrator of the 
Minority Business Development Agency. Unfortunately, the SBPAC 
has never submitted comments on proposed acquisition 
regulations. Its meetings are of such little value that the 
OSDBUs have formed their own OSDBU council independent of 
SBPAC. The OSDBU Council has no official standing or 
authorization, yet has its own website and hosts an annual 
conference--more than the SBPAC has ever accomplished. However, 
even the OSDBU Council does not comment on regulations. H.R. 
3851 imposes new requirements on the SBPAC to ensure that it 
achieves the original intent of Congress--to be an effective 
advocate on behalf of small businesses in the federal 
procurement regulatory arena.

                              IV. Hearings

    In the 112th Congress, the Subcommittee on Contracting and 
the Workforce met on September 15, 2011, for a hearing titled 
``Helping Small Businesses Compete: Challenges within Programs 
Designed to Assist Small Contractors.'' At the hearing, 
witnesses testified that federal agencies are not in compliance 
with section 15(k) of the Small Business Act.

                       V. Committee Consideration

    The Committee on Small Business met in open session, with a 
quorum being present, on March 7, 2012 and ordered H.R. 3851 
reported, as amended, to the House by a Roll Call vote of 11 
yeas and 7 nos at 1:47 pm. During the markup, two amendments 
were offered and adopted. Disposition of the amendments is 
addressed below and is based on the order amendments were filed 
with the Clerk of the Committee and not necessarily in the 
order that they were considered at the markup.
    Amendment Number One filed by Chairman Graves (R-MO) 
requires the OSDBU director have at least 10 years of prior 
relevant experience. The amendment was adopted by voice vote at 
1:42 pm.
    Amendment Number Two filed by Ms. Hahn (D-CA) requires that 
the small business specialist assigned to assist the 
Procurement Center Representatives give priority to assisting 
small businesses located in metropolitan statistical areas with 
unemployment rates that are higher than the national average. 
The amendment was adopted by voice vote at 1:43 pm.
    H.R. 3851 was ordered reported out of Committee by a Roll 
Call vote of 11 yeas and 7 nos at 1:47 pm.

                          VI. Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report the legislation and amendments 
thereto.

        Amendment to H.R. 3851 Offered by Mr. Graves of Missouri


  Page 4, insert after line 19 the following (and redesignate 
provisions accordingly):
  (e) Requirement of Contracting Experience for OSDBU 
Director.--Section 15(k) of the Small Business Act (15 U.S.C. 
644(k)), as amended by this Act, is further amended, in the 
matter preceding paragraph (1), by striking ``who shall'' and 
insert the following: ``, with at least 10 years of experience 
serving in any combination of the following roles: federal 
contracting officer, small business technical advisor, 
contracts administrator for federal government contracts, 
attorney specializing in federal procurement law, small 
business liaison officer, officer or employee who managed 
federal government contracts for a small business, or 
individual whose primary responsibilities were for the 
functions and duties of sections 8, 15 or 44 of this Act. Such 
officer or employee shall''.

        Amendment to H.R. 3851 Offered by Ms. Hahn of California


  Page 3, beginning on line 4, strike ``Section (15)(k)(8)(B)'' 
and insert the following:
          (1) Expansion of role.--Section (15)(k)(8)(B)

  Page 3, line 6, strike ``by striking'' and insert the 
following: ``--
          (1) by striking

  Page 3, insert after line 7 the following:
          (2) by inserting after ``of this Act'' the following: 
        ``(giving priority in assigning to small business that 
        are in metropolitan statistical areas for which the 
        unemployment rate is higher than the national average 
        unemployment rate for the United States)''.
        
        
        VII. Section-by-Section Analysis of H.R. 3851 as Amended


Section 1. Short Title

    Section 1 designates the bill as the ``Small Business 
Advocate Act of 2012.''

Section 2. Offices of Small and Disadvantaged Business Utilization

            Subsection (a)--Appointment and Position of Director 
    In 1978, section 15(k) of the Small Business Act (the Act) 
established an Office of Small and Disadvantaged Business 
Utilization within ``each Federal agency having procurement 
powers.''\22\ While the nomenclature of these offices varies 
slightly from agency to agency, both the offices and the heads 
of the offices are collectively referred to as OSDBUs. Each 
OSDBU is to be appointed by the head of the agency, and, with 
the exception of the Department of Defense, ``be responsible 
only to, and report directly to, the head of such agency or to 
the deputy of such head.''\23\
---------------------------------------------------------------------------
    \22\15 U.S.C. Sec. 644(k).
    \23\Id. at Sec. 644(k)(2)-(3).
---------------------------------------------------------------------------
    While it was clearly the intention of the Small Business 
Act that the OSDBU be a very senior executive of the 
contracting agency, in some agencies the OSDBU is a mid-level 
employee, far outranked by the Chief Acquisition Officer (CAO) 
or Senior Procurement Executive (SPE). Since the OSDBU is 
supposed to be a check on the procurement activities of the CAO 
and OSDBU, this de facto demotion has limited the OSDBUs 
effectiveness.
    Therefore, subsection (a) amends the Act to ensure that the 
OSDBU is a member of the Senior Executive Service--the 
classification of federal employees serving in political and 
career managerial, supervisory, and policy positions classified 
above civil service's General Schedule grade 15 or equivalent 
positions in the Executive Branch.\24\ This action will put the 
OSDBU back on par with the CAO.\25\ However, should an agency 
not have a CAO, the OSDBU is instead granted status as a 
General Schedule grade 15 employee. The Committee believes that 
the language ensures OSDBUs will have an appropriate stature 
depending upon the agencies in which they are located.
---------------------------------------------------------------------------
    \24\5 U.S.C. Sec. 3132(a).
    \25\Pursuant to 41 U.S.C. Sec. 1702 only agencies required by 31 
U.S.C. 901(b)(2)(C) to have Chief Financial Officers are required to 
have CAOs.
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            Subsection (b)--Performance Appraisals
    As previously mentioned, the OSDBU is required to report 
directly and exclusively to the head of the agency or the 
deputy of such head. However, through investigations related to 
the Subcommittee on Contracting and Workforce's investigations 
into the role of the OSDBU, the Committee has become aware that 
in several agencies the OSDBU's performance appraisals are 
conducted by the CAO or another official. Therefore, this bill 
clarifies that the requirements of section 15(k)(3) mean that 
the OSDBU's performance appraisals must also be conducted by 
the head or deputy head of the agency. This requirement avoids 
the potential conflict of the OSDBU challenging the decisions 
of the individual that issues the OSDBU's performance 
appraisal.
            Subsection (c)--Small Business Technical Advisers 
    Small business technical advisors are OSDBU employees 
assigned to assist the SBA's Procurement Center Representatives 
in section 15(k)(8)(B) of the Act. Currently, the OSDBUs are 
assigned to provide assistance consistent with sections 8 and 
15 of the Act. However, when contract consolidation was added 
to section 44 of the Act, this reference was not updated even 
though the technical advisors and OSDBUs have responsibilities 
related to contract bundling and consolidation. Therefore, 
paragraph (1) updates section 15(k)(8) to reference section 44 
and ensures that OSDBUs are involved in contract consolidation 
and bundling matters.
    The bill also directs that the small business technical 
advisers prioritize assistance to small businesses in 
metropolitan statistical areas (MSAs) that have an unemployment 
rate higher than the national average. In section 3(p)(4) of 
the Act, MSAs are given the meaning assigned in section 
143(k)(2)(B) of the Internal Revenue Code of 1986. As small 
business technical advisors currently provide assistance to any 
business requesting it including businesses that are not small, 
the Committee expects that this provision will not affect the 
delivery of assistance to any small business, but will instead 
remind the OSDBU offices of the connection between small 
business contracting and job creation.
            Subsection (d)--Additional Requirements 
    H.R. 3851 adds five more duties on the OSDBUs. While the 
Committee recognizes that the OSDBUs have limited resources, 
the additional responsibilities are vital to ensuring maximum 
practicable opportunity is provided to small businesses.
    First, a new paragraph (11) is added which requires that 
the OSDBU review and advise the agency on any insourcing 
decisions pertaining to small businesses. The OSDBU does not 
have the right to veto these activities; nevertheless their 
intercession may mitigate adverse impacts on small businesses 
by, among other things, prioritizing insourcing of contracts 
held by other-than-small businesses. This is in keeping with 
practice at some agencies, such as the Department of Homeland 
Security, and with guidance issued by the Office of Federal 
Procurement Policy.\26\ While some may argue that this is an 
effort to have a government employee advocate against 
insourcing, this is only an effort to assign an advocate for 
small businesses in general within the process, much as a 
government employee was assigned responsibility for being the 
advocate for other federal employees under Office of Management 
and Budget Circular A-76 proceedings.\27\
---------------------------------------------------------------------------
    \26\Administrator of the Office of Federal Procurement Policy 
(OFPP) directed that when insourcing ``the agency should involve its 
small business representative in the same manner as it would in working 
with the acquisition and program office in evaluating opportunities for 
small businesses for new work.'' OFPP, Increasing Small Business 
Participation in Federal Contracting 15 (2011) directing that
    \27\Furthermore, it is not substantially different than the role 
the Chief Counsel for Advocacy plays in arguing that regulations should 
be modified or halted if they have adverse consequences on small 
businesses. 15 U.S.C. Sec. 634c.
---------------------------------------------------------------------------
    The bill also adds a new paragraph (12) which requires that 
the OSDBU advise the CAO and SPE with advice and comments on 
acquisition strategies, market research, and bundling or 
consolidation justification. This expanded role should promote 
better acquisition planning and market research so that 
contracting personnel are cognizant of the roles and 
capabilities of small business throughout the acquisition 
process.
    Paragraph (13) allows the OSDBU to provide training. Recent 
GAO reports indicate that this is a primary function of the 
OSDBU.\28\ The Committee supports the initiative of the OSDBUs 
and codifies it in this paragraph. However, given that funding 
is provided to Procurement Technical Assistance Centers, Small 
Business Development Centers, the Federal Acquisition 
Institute, Defense Acquisition University and others to provide 
training to small businesses and contracting personnel, the 
bill limits the provision of training by stating that it cannot 
interfere with the other core functions of the OSDBU. The 
Committee intends that the priorities of the OSDBUs should be 
to advocate on behalf of small business not educate them or 
agencies on small business contracting programs.
---------------------------------------------------------------------------
    \28\GAO, Small Business Contracting at 21 (2011).
---------------------------------------------------------------------------
    Currently, many of the OSDBU directors concurrently serve 
as CAO, SPE, Chief Financial Officer, or in other roles. This 
presents a conflict of interest, since CAO is statutorily 
responsible for ``increasing the use of full and open 
competition'' while the OSDBU is responsible for increasing the 
use of small businesses.\29\ Furthermore, it deprives small 
businesses of a dedicated advocate because a lower level 
employee, one that does not report to the agency head or 
deputy, is assigned the actual OSDBU responsibilities. 
Therefore, paragraph (14) requires that the Director carry out 
only the duties enumerated in Sec. 15(k).
---------------------------------------------------------------------------
    \29\41 U.S.C. Sec. 414(b)(2).
---------------------------------------------------------------------------
    The Committee has heard concerns that some OSDBUs simply go 
from conference to conference, and are rarely available to 
assist small businesses or review acquisition strategies. 
Paragraph (15) requires the OSDBU to report on the amount of 
training they provide and how much of the OSDBU budget goes to 
training and travel. As the authority of the OSDBU is 
increased, and the OSDBU's rank is similarly increased, the 
Committee intends that the OSDBU use this authority to advance 
opportunities by small business concerns in the federal 
procurement arena through active and dedicated participation in 
the planning and execution of the agency's procurement 
strategies.
            Subsection (e)--Requirement of Contracting Experience for 
                    OSDBU Director.
    Subsection (e) inserts an additional qualification 
requirement for the OSDBU Director. Specifically, it requires 
that the Director have at least ten years of relevant 
experience prior to being appointed. This experience could be 
drawn from time as a federal employee or as a private sector 
employee. Qualifying public sector experience includes serving 
as a contracting officer or small business technical advisor. 
Relevant private sector experience includes contracts 
administrator for federal contracts, acting as a small business 
liaison officer for a large business, or managing federal 
contracts for a small business. Additionally, practicing 
federal procurement law, or filling a role requiring that an 
individual's primary responsibilities be for the government 
contracting portions of the Act would qualify, regardless of 
whether the experience was as a government employee or in the 
private sector. The ten years of experience could also come 
from a combination of these jobs. The intention of this 
provision is to ensure that OSDBU Director understands the role 
of small business in federal contracting as well as federal 
procurement in general. This will ensure that the OSDBUs are 
qualified advocates for small businesses.
            Subsection (f)--Technical Amendments 
    Subsection (e) contains appropriate technical amendments 
needed to make the Act consistent with the changes made by the 
Committee in H.R. 3851.

Section 3. Small Business Procurement Advisory Council

            Subsection (a)--Duties 
    The SBPAC was established by the Federal Acquisition 
Streamlining Act of 1994 to provide small businesses with an 
advocate in federal procurement regulatory process.\30\ The 
SBPAC was tasked with commenting on proposed acquisition 
regulations. However, to date, the Committee is unaware of any 
such comment letters filed by the SBPAC. Instead, the group has 
turned into a best practices forum.
---------------------------------------------------------------------------
    \30\15 U.S.C. Sec. 644 note.
---------------------------------------------------------------------------
    Consequently, subsection (a) of the bill assigns new duties 
to the SBPAC. First, in a new paragraph (3), it requires that 
the group conduct peer reviews of the individual agency OSDBU 
offices in order to assess how well the office complies with 
the requirements of section 15(k) of the Act. After GAO 
reported that many OSDBUs do not meet the requirements, these 
peer reviews should provide additional insight and serve as a 
check before the OSDBU position veers from its intended 
statutory role.
    Next, a new paragraph (4) is added to require that the 
SBPAC identify best practices to improve small business 
procurement opportunities. This codifies an already existing 
activity, and will ensure that such practices are disseminated 
widely across agencies.
    Finally, paragraph (5) is added to require that that SBPAC 
report annually to the Committee and the Committee on Small 
Business and Entrepreneurship of the Senate on the comment 
letters it files on procurement regulations pursuant to its 
authority under paragraph (2), including the disposition of 
such comments in the final rule; the results of the peer 
reviews conducted under paragraph (3); and the best practices 
identified by the SBPAC pursuant to paragraph (4). This will 
allow the Committees to monitor the effectiveness of the SBPAC 
OSDBU offices. The Committee expects that the reports also will 
reenergize the original mission of the SBPAC.
            Subsection (b)--Membership 
    Subsection (b) contains appropriate technical amendments 
necessitated by H.R. 3851.
            Subsection (c)--Chairman 
    Current law requires that the Administrator chair the 
SBPAC. However, this role has been delegated to the Associate 
Administrator for Government Contracting and Business 
Development. Subsection (c) makes this delegation permissible. 
Codification of this authority does not undermine the general 
administrative concept that, except if prohibited by statute, 
the Administrator may delegate any power granted by Congress to 
a subordinate.

                        VIII. Unfunded Mandates

    H.R. 3851 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act, Pub. 
L. No. 104-4, and would impose no costs on state, local or 
tribal governments.

  IX. New Budget Authority, Entitlement Authority and Tax Expenditures

    The Committee does not provide an opinion and estimate with 
respect to new budget authority, entitlement authority and tax 
expenditures in compliance with clause 3(c)(2) of rule XIII of 
the Rules of the House, as the Committee has not received a 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to Sec. 402 of the Congressional Budget 
Act of 1974.

                         X. Oversight Findings

    In accordance with clause 2(b)(1) of rule X of the Rules of 
the House, the oversight findings and recommendations of the 
Committee on Small Business with respect to the subject matter 
contained in H.R. 3851 are incorporated into the descriptive 
portions of this report.

               XI. Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
authority for this legislation in Art. I, Sec. 8, cls. 1, 3, 
and 18 and Art. IV, Sec. 3, cl. 2 of the Constitution of the 
United States.

                 XII. Congressional Accountability Act

    H.R. 3851 does not relate to the terms and conditions of 
employment or access to public services or accommodations 
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.

             XIII. Federal Advisory Committee Act Statement

    H.R. 3851 does not establish or authorize the establishment 
of any new advisory committees as that term is defined in the 
Federal Advisory Committee Act, 5 U.S.C. App. 2.

                     XIV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 3851 does not 
contain any congressional earmarks, limited tax benefits or 
limited tariff benefits as defined in subsections (d), (e) or 
(f) of clause 9 of rule XXI of the Rules of the House.

                  XV. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House, the Committee establishes the following performance 
related goals and objectives for this legislation:

        H.R. 3851 includes a number of provisions designed to 
        improve the effectiveness of small business advocates 
        and to improve compliance with the Small Business Act.

       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




           *       *       *       *       *       *       *
  Sec. 15.(a) * * *

           *       *       *       *       *       *       *

  (k) There is hereby established in each Federal agency having 
procurement powers an office to be known as the ``Office of 
Small and Disadvantaged Business Utilization''. The management 
of each such office shall be vested in an officer or employee 
of such agency [who shall], with at least 10 years of 
experience serving in any combination of the following roles: 
federal contracting officer, small business technical advisor, 
contracts administrator for federal government contracts, 
attorney specializing in federal procurement law, small 
business liaison officer, officer or employee who managed 
federal government contracts for a small business, or 
individual whose primary responsibilities were for the 
functions and duties of section 8, 15 or 44 of this Act. Such 
officer or employee--
          (1) [be known] shall be known as the ``Director of 
        Small and Disadvantaged Business Utilization'' for 
        [such agency,] such agency;
          (2) [be appointed by] shall be appointed by the head 
        of [such agency,] such agency to a position that is a 
        Senior Executive Service position (as such term is 
        defined under section 3132(a) of title 5, United States 
        Code), except that, for any agency in which the 
        positions of Chief Acquisition Officer and senior 
        procurement executive (as such terms are defined under 
        section 44(a) of this Act) are not Senior Executive 
        Service positions, the Director of Small and 
        Disadvantaged Business Utilization may be appointed to 
        a position compensated at not less than the minimum 
        rate of basic pay payable for grade GS-15 of the 
        General Schedule under section 5332 of such title 
        (including comparability payments under section 5304 of 
        such title);
          (3) [be responsible only to, and report directly to, 
        the head] shall be responsible only to (including with 
        respect to performance appraisals), and report directly 
        and exclusively to, the head of such agency or to the 
        deputy of such head, except that the [director] 
        Director for the Office of the Secretary of Defense 
        shall [be responsible only to, and report directly to, 
        such Secretary] be responsible only to (including with 
        respect to performance appraisals), and report directly 
        and exclusively to, such Secretary or the [Secretary's 
        designee,] Secretary's designee;
          (4) [be responsible] shall be responsible for the 
        implementation and execution of the functions and 
        duties under sections 8 and 15 of this Act which relate 
        to [such agency,] such agency;
          (5) [identify proposed] shall identify proposed 
        solicitations that involve significant bundling of 
        contract requirements, and work with the agency 
        acquisition officials and the Administration to revise 
        the procurement strategies for such proposed 
        solicitations where appropriate to increase the 
        probability of participation by small businesses as 
        prime contractors, or to facilitate small business 
        participation as subcontractors and suppliers, if a 
        solicitation for a bundled contract is to be issued;
          (6) [assist small] shall assist small business 
        concerns to obtain payments, required late payment 
        interest penalties, or information regarding payments 
        due to such concerns from an executive agency or a 
        contractor, in conformity with chapter 39 of title 31, 
        United States Code, or any other protection for 
        contractors or subcontractors (including suppliers) 
        that is included in the Federal Acquisition Regulation 
        or any individual agency supplement to such Government-
        wide regulation;
          (7) [have supervisory] shall have supervisory 
        authority over personnel of such agency to the extent 
        that the functions and duties of such personnel relate 
        to functions and duties under sections 8 and 15 of 
        [this Act,] this Act;
          (8) [assign a] shall assign a small business 
        technical adviser to each office to which the 
        Administration has assigned a procurement center 
        representative--
                  (A) who shall be a full-time employee of the 
                procuring activity and shall be well qualified, 
                technically trained and familiar with the 
                supplies or services purchased at [the 
                activity, and] the activity; and
                  (B) whose principal duty shall be to assist 
                the Administration procurement center 
                representative in his duties and functions 
                relating to sections 8 [and 15 of this Act,], 
                15, and 44 of this Act (giving priority in 
                assigning to small business that are in 
                metropolitan statistical areas for which the 
                unemployment rate is higher than the national 
                average unemployment rate for the United 
                States);
          (9) [cooperate, and] shall cooperate, and consult on 
        a regular basis, with the Administration with respect 
        to carrying out the functions and duties described in 
        paragraph (4) of this [subsection, and] subsection;
          (10) [make recommendations] shall make 
        recommendations to contracting officers as to whether a 
        particular contract requirement should be awarded 
        pursuant to [subsection (a), or section] subsection 
        (a), section 8(a) of this [Act or section 2323] Act, or 
        section 2323 of title 10, United States [Code. Such 
        recommendations shall] Code, which shall be made with 
        due regard to the requirements of subsection (m), and 
        the failure of the contracting officer to accept any 
        such recommendations shall be documented and included 
        within the appropriate [contract file.] contract file;
          (11) shall review and advise such agency on any 
        decision to convert an activity performed by a small 
        business concern to an activity performed by a Federal 
        employee;
          (12) shall provide to the Chief Acquisition Officer 
        and senior procurement executive of such agency advice 
        and comments on acquisition strategies, market 
        research, and justifications related to section 44 of 
        this Act;
          (13) may provide training to small business concerns 
        and contract specialists, except that such training may 
        only be provided to the extent that the training does 
        not interfere with the Director carrying out other 
        responsibilities under this subsection;
          (14) shall carry out exclusively the duties 
        enumerated in this Act, and shall, while the Director, 
        not hold any other title, position, or responsibility, 
        except as necessary to carry out responsibilities under 
        this subsection; and
          (15) shall submit, each fiscal year, to the Committee 
        on Small Business of the House of Representatives and 
        the Committee on Small Business and Entrepreneurship of 
        the Senate a report describing--
                  (A) the training provided by the Director 
                under paragraph (13) in the most recently 
                completed fiscal year;
                  (B) the percentage of the budget of the 
                Director used for such training in the most 
                recently completed fiscal year; and
                  (C) the percentage of the budget of the 
                Director used for travel in the most recently 
                completed fiscal year.

           *       *       *       *       *       *       *

                              ----------                              


              FEDERAL ACQUISITION STREAMLINING ACT OF 1994



           *       *       *       *       *       *       *
            TITLE VII--SMALL BUSINESS AND SOCIOECONOMIC LAWS

Subtitle A--Small Business Laws

           *       *       *       *       *       *       *


SEC. 7104. SMALL BUSINESS PROCUREMENT ADVISORY COUNCIL.

  (a) * * *
  (b) Duties.--The duties of the Council are--
          (1) to develop positions on proposed procurement 
        regulations affecting the small business community; 
        [and]
          (2) to submit comments reflecting such positions to 
        appropriate regulatory [authorities.] authorities;
          (3) to conduct reviews of each Office of Small and 
        Disadvantaged Business Utilization established under 
        section 15(k) of the Small Business Act (15 U.S.C. 
        644(k)) to determine the compliance of each Office with 
        requirements under such section;
          (4) to identify best practices for maximizing small 
        business utilization in Federal contracting that may be 
        implemented by Federal agencies having procurement 
        powers; and
          (5) to submit, annually, to the Committee on Small 
        Business of the House of Representatives and the 
        Committee on Small Business and Entrepreneurship of the 
        Senate a report describing--
                  (A) the comments submitted under paragraph 
                (2) during the 1-year period ending on the date 
                on which the report is submitted, including any 
                outcomes related to the comments;
                  (B) the results of reviews conducted under 
                paragraph (3) during such 1-year period; and
                  (C) best practices identified under paragraph 
                (4) during such 1-year period.
  (c) Membership.--The Council shall be composed of the 
following members:
          (1) * * *

           *       *       *       *       *       *       *

          (3) The head of each Office of Small and 
        Disadvantaged Business Utilization [(established under 
        section 15(k) of the Small Business Act (15 U.S.C. 
        644(k))] in each Federal agency having procurement 
        powers.
  (d) Chairman.--The Council shall be chaired by the 
Administrator of the Small Business Administration (or the 
designee of the Administrator).

           *       *       *       *       *       *       *