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115th Congress    }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                    {       115-243

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



 
       PROTECTING BUSINESS OPPORTUNITIES FOR VETERANS ACT OF 2017

                                _______
                                

 July 24, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Roe of Tennessee, from the Committee on Veterans' Affairs, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2749]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 2749) to amend title 38, United States Code, to 
improve the oversight of contracts awarded by the Secretary of 
Veterans Affairs to small business concerns owned and 
controlled by veterans, and for other purposes, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Subcommittee Consideration.......................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     4
Statement of General Performance Goals and Objectives............     4
New Budget Authority, Entitlement Authority, and Tax Expenditures     4
Earmarks and Tax and Tariff Benefits.............................     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     5
Constitutional Authority Statement...............................     5
Applicability to Legislative Branch..............................     5
Statement on Duplication of Federal Programs.....................     5
Disclosure of Directed Rulemaking................................     5
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill as Reported.............     6

                          Purpose and Summary

    H.R. 2749, the ``Protecting Business Opportunities for 
Veterans Act of 2017,'' was introduced by Representative Jack 
Bergman of Michigan on May 26, 2017. H.R. 2749 would strengthen 
enforcement of existing restrictions on Veteran- and Service 
Disabled Veteran-Owned Small Businesses improperly passing 
through Department of Veterans Affairs (VA) contracts. An 
``improper pass-through'' occurs when a small business obtains 
a contract but does not perform the required percentage of 
work, instead giving the work to another business while 
collecting profit. The legislation requires Veteran- and 
Service Disabled Veteran-Owned Small Businesses to certify that 
they are performing the required percentage of work and directs 
VA to refer violators or suspected violators to the VA Office 
of Inspector General (OIG) for investigation. Finally, the 
legislation references existing administrative and criminal 
penalties for fraudulent representation and directs the 
Secretary to consider whether they should apply in each case.

                  Background and Need for Legislation

    The Small Business Act (15 U.S.C. 657s) and Part 19 of the 
Federal Acquisition Regulation set forth limitations on 
subcontracting for small businesses. A limitation on 
subcontracting is effectuated as a minimum percentage of work 
that a small business prime contractor must perform itself. The 
small business may not subcontract out the work, except to 
another small business of the same type, called a ``similarly 
situated entity.'' The percentage of work a small business is 
required to perform depends on whether the contract is for 
supplies, services, or construction. Each contracting officer 
awarding a particular contract is tasked with detecting 
violations of these limitations, called improper pass-throughs, 
on that contract. In practice, contracting officers lack tools 
to detect improper pass-throughs, and they proliferate widely. 
A contracting officer's only options to demonstrate an improper 
pass-through are to monitor the contractor's performance 
personally or to scrutinize invoices. These methods are time 
consuming and typically ineffectual, because it is often 
unclear for which company or companies employees work, invoices 
are vague, and the contracting officer has no ability to 
examine subcontractor invoices or business records.
    The Veterans Benefits, Health Care, and Information 
Technology Act of 2006 (38 U.S.C. 8127) gave Veteran Owned 
Small Businesses (VOSBs) and Service Disabled Veteran Owned 
Small Businesses (SDVOSBs) particular preference in VA 
contracting, called the Rule of Two. VA must set aside 
contracts for competition among them, with SDVOSBs having first 
preference and VOSBs having second preference, when it expects 
that two or more such businesses will submit an offer, and the 
contract can be awarded at a fair and reasonable price. The 
Supreme Court ruled in Kingdomware Technologies, Inc. v. United 
States on June 16, 2016, that the Rule of Two applies to all VA 
contracting. Thus, VOSBs and SDVOSBs now receive substantially 
all VA contracts that are set aside for small business, so the 
issue of compliance with limitations on subcontracting now 
primarily concerns VOSBs and SDVOSBs. Improper pass-throughs 
are problematic, because they create unnecessary layers of 
profit that wastefully inflate the costs of federal contracts. 
Moreover, improper pass-throughs deny law abiding VOSBs and 
SDVOSBs the opportunity to obtain and perform work, through 
which they establish agency contacts and grow their businesses.
    The legislation is necessary to improve existing detection 
and enforcement of improper pass-throughs. Companies would be 
required to submit certifications with all quotes or proposals 
specifying the performance requirements they are subject to, 
indicating compliance, and acknowledging the applicability of 
criminal penalties for fraud or false statements. Such 
certification may dissuade companies from executing improper 
pass-throughs and would remove the excuse that a company was 
unaware of the specific limitation on subcontracting that 
applies. Explicitly tasking OIG to assist VA in investigating 
improper pass-throughs will bring a level of expertise and 
resources far above what individual contracting officers can 
muster.
    Finally, the issue of bundling is relevant to the 
legislation. ``Bundling'' is defined in Part 2 of the Federal 
Acquisition Regulation as combining two or more purchases, 
which were previously made under separate smaller contracts, 
into one contract in a way that will likely render small 
businesses unable to perform. The practice of bundling is 
restricted by a variety of statutes and regulations concerning 
procurement. Nonetheless, agencies periodically engage in 
bundling after following regulatory processes to justify the 
bundling, or by disregarding the restrictions. It is improper 
for VA or any agency to engage in bundling in order to enlarge 
the size of contracts to make limitations on subcontracting 
more difficult for small businesses, including VOSBs and 
SDVOSBs, to comply with. Similarly, it would be improper for VA 
to engage in bundling in this manner in order to apply the 
penalties set forth in this legislation. The intent of the 
legislation is to detect and reduce improper pass-throughs that 
exist in the normal course of VA procurement activities, not 
pass-throughs that become improper directly as the result of 
bundling.

                                Hearings

    There were no full Committee hearings held on H.R. 2749.
    On June 29, 2017, the Subcommittee on Oversight and 
Investigations conducted a legislative hearing on: H.R. 2006, 
H.R. 2749, H.R. 2781, and a draft bill to improve the hiring, 
training, and efficiency of acquisition personnel and 
organizations of the Department of Veterans Affairs, and for 
other purposes (now H.R. 3169).
    The following witnesses testified:
          The Honorable Jack Bergman of Michigan; the Honorable 
        Ann McLane Kuster of New Hampshire; the Honorable Mike 
        Coffman of Colorado; the Honorable Neal Dunn of 
        Florida; the Honorable Jimmy Panetta of California; the 
        Honorable Bruce Poliquin of Maine; Mr. Thomas Burgess, 
        Associate Deputy Assistant Secretary, Office of 
        Logistics and Supply Chain Management, Department of 
        Veterans Affairs; Mr. Thomas Leney Executive Director, 
        Small and Veteran Business Programs, Office of Small 
        and Disadvantaged Business Utilization, Department of 
        Veterans Affairs; Ms. Kaitlin Gray, Assistant Director, 
        National Veterans Employment and Education Division, 
        The American Legion; Mr. Patrick Murray, Associate 
        Director, National Legislative Service, Veterans of 
        Foreign Wars of the United States; and Mr. Wayne 
        Simpson, Member, National Veterans Small Business 
        Coalition.
    A statement for the record was submitted by:
          The Associated General Contractors of America.

                       Subcommittee Consideration

    On July 12, 2017, the Subcommittee on Oversight and 
Investigations met in open markup session, a quorum being 
present, and ordered H.R. 2749 reported favorably to the full 
Committee. A motion by Representative Ann McLane Kuster of New 
Hampshire to report H.R. 2749 favorably to the House of 
Representatives was agreed to by voice vote.

                        Committee Consideration

    On July 19, 2017, the full Committee met in open markup 
session, a quorum being present, and ordered H.R. 2749 reported 
favorably to the House of Representatives by voice vote. A 
motion by Representative Tim Walz of Minnesota to report H.R. 
2749 favorably to the House of Representatives was agreed to by 
voice vote.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, no recorded votes were taken on 
amendments or in connection with ordering H.R. 2749 reported to 
the House.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are to ensure the Secretary of Veterans 
Affairs has the sufficient mechanisms to identify, investigate, 
and penalize businesses that improperly utilize contracting 
set-asides meant for the performance of work by Veteran- and 
Service Disabled Veteran-Owned Small Businesses.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    A Congressional Budget Office (CBO) report was not 
available at the time this report was filed. The Committee 
believes that there is no new budget authority, entitlement 
authority, or tax expenditures.

                  Earmarks and Tax and Tariff Benefits

    H.R. 2749 does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI of the Rules of the House of 
Representatives.

                        Committee Cost Estimate

    A CBO report was not available at the time this report was 
filed. The Committee believes that there are no effects on 
direct spending or revenues.

               Congressional Budget Office Cost Estimate

    A CBO report was not available at the time this report was 
filed. CBO has preliminarily estimated that there are no 
effects on direct spending or revenues.

                       Federal Mandates Statement

    A CBO report was not available at the time this report was 
filed. The Committee believes that there are no Federal 
mandates.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act would be created by H.R. 
2749.

                   Constitutional Authority Statement

    Pursuant to Article I, section 8 of the United States 
Constitution, H.R. 2749 is authorized by Congress' power to 
``provide for the common Defense and general Welfare of the 
United States.''

                  Applicability to Legislative Branch

    The Committee finds that H.R. 2749 does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of section 102(b)(3) of 
the Congressional Accountability Act.

              Statement on Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that no provision 
of H.R. 2749 establishes or reauthorizes a program of the 
Federal Government known to be duplicative of another Federal 
program, a program that was included in any report from the 
Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 115th Cong. (2017), 
H.R. 2749 contains no directed rule making that would require 
the Secretary to prescribe regulations.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Section 1 cites the short title of H.R. 2749 to be the 
``Protecting Business Opportunities for Veterans Act of 2017.''

Section 2. Limitations on subcontracts under contracts with small 
        business concerns owned and controlled by veterans

    Section 2(a) would amend section 8127 of title 38, U.S.C., 
by redesignating subsection (l) as subsection (m) and inserting 
a new subsection (l) entitled, ``Limitations on 
Subcontracting.''
    Section 8127(l)(1) would dictate that the requirements 
applicable to a covered small business concern under section 46 
of the Small Business Act also apply with respect to a Veteran- 
or Service Disabled Veteran-Owned Small Business under this 
Section. The term ``similarly situated entity'' used in section 
46 of the Small Business Act would also include a Veteran- or 
Service Disabled Veteran-Owned Small Business subcontracted by 
another Veteran- or Service Disabled Veteran-Owned Small 
Business.
    Section 8127(l)(2) would only allow the Secretary to award 
a contract under Section 8127 after obtaining a certification 
from the offeror that it will comply with the requirements 
described in Section 8127(l)(1). The certification must specify 
the exact performance requirements applicable under Section 
8127(l)(1) and explicitly acknowledge that the certification is 
subject to the penalties described in section 1001 of title 18, 
U.S.C.
    Section 8127(l)(3) would require VA's Director of Small and 
Disadvantaged Business Utilization and its Chief Acquisition 
Officer to jointly implement a process using the systems 
described in section 16(g)(2) of the Small Business Act, and 
any other relevant systems available, to monitor compliance 
with this subsection and jointly refer any violations or 
suspected violations to the VA Office of Inspector General. 
This Section would further require any small business concern 
that the Secretary determines, in consultation with the Office 
of Inspector General, did not act in good faith with respect to 
the requirements described in Section 8127(l)(1), to receive 
any or all of the following: (i) referral to the VA Debarment 
and Suspension Committee; (ii) a fine under section 16(g)(1) of 
the Small Business Act; and (iii) prosecution for violating 
section 1001 of title 18, U.S.C. The VA Office of Inspector 
General would also be required by this Section to submit a 
report to the House and Senate Committees on Veterans' Affairs 
detailing, for the fiscal year during which the report is 
submitted, (i) the number of referred violations and suspected 
violations received under this Section; and (ii) the 
disposition of same, including the number of small business 
concerns suspended or debarred from Federal contracting or 
referred to the Attorney General for prosecution.
    Section 2(b) would make the new subsection (l) created by 
Section 2(a) of this legislation effective with respect to any 
contract entered into after the date of enactment of this 
legislation.

         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):

         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, and existing law in which no 
change is proposed is shown in roman):

                      TITLE 38, UNITED STATES CODE




           *       *       *       *       *       *       *
PART VI--ACQUISITION AND DISPOSITION OF PROPERTY

           *       *       *       *       *       *       *


   CHAPTER 81--ACQUISITION AND OPERATION OF HOSPITAL AND DOMICILIARY 
    FACILITIES; PROCUREMENT AND SUPPLY; ENHANCED-USE LEASES OF REAL 
PROPERTY

           *       *       *       *       *       *       *



SUBCHAPTER II--PROCUREMENT AND SUPPLY

           *       *       *       *       *       *       *



Sec. 8127. Small business concerns owned and controlled by veterans: 
                    contracting goals and preferences

  (a) Contracting Goals.--(1) In order to increase contracting 
opportunities for small business concerns owned and controlled 
by veterans and small business concerns owned and controlled by 
veterans with service-connected disabilities, the Secretary 
shall--
                  (A) establish a goal for each fiscal year for 
                participation in Department contracts 
                (including subcontracts) by small business 
                concerns owned and controlled by veterans who 
                are not veterans with service-connected 
                disabilities in accordance with paragraph (2); 
                and
                  (B) establish a goal for each fiscal year for 
                participation in Department contracts 
                (including subcontracts) by small business 
                concerns owned and controlled by veterans with 
                service-connected disabilities in accordance 
                with paragraph (3).
          (2) The goal for a fiscal year for participation 
        under paragraph (1)(A) shall be determined by the 
        Secretary.
          (3) The goal for a fiscal year for participation 
        under paragraph (1)(B) shall be not less than the 
        Government-wide goal for that fiscal year for 
        participation by small business concerns owned and 
        controlled by veterans with service-connected 
        disabilities under section 15(g)(1) of the Small 
        Business Act (15 U.S.C. 644(g)(1)).
          (4) The Secretary shall establish a review mechanism 
        to ensure that, in the case of a subcontract of a 
        Department contract that is counted for purposes of 
        meeting a goal established pursuant to this section, 
        the subcontract was actually awarded to a business 
        concern that may be counted for purposes of meeting 
        that goal.
  (b) Use of Noncompetitive Procedures for Certain Small 
Contracts.--For purposes of meeting the goals under subsection 
(a), and in accordance with this section, in entering into a 
contract with a small business concern owned and controlled by 
veterans for an amount less than the simplified acquisition 
threshold (as defined in section 134 of title 41), a 
contracting officer of the Department may use procedures other 
than competitive procedures.
  (c) Sole Source Contracts for Contracts Above Simplified 
Acquisition Threshold.--For purposes of meeting the goals under 
subsection (a), and in accordance with this section, a 
contracting officer of the Department may award a contract to a 
small business concern owned and controlled by veterans using 
procedures other than competitive procedures if--
          (1) such concern is determined to be a responsible 
        source with respect to performance of such contract 
        opportunity;
          (2) the anticipated award price of the contract 
        (including options) will exceed the simplified 
        acquisition threshold (as defined in section 134 of 
        title 41) but will not exceed $5,000,000; and
          (3) in the estimation of the contracting officer, the 
        contract award can be made at a fair and reasonable 
        price that offers best value to the United States.
  (d) Use of Restricted Competition.--Except as provided in 
subsections (b) and (c), for purposes of meeting the goals 
under subsection (a), and in accordance with this section, a 
contracting officer of the Department shall award contracts on 
the basis of competition restricted to small business concerns 
owned and controlled by veterans if the contracting officer has 
a reasonable expectation that two or more small business 
concerns owned and controlled by veterans will submit offers 
and that the award can be made at a fair and reasonable price 
that offers best value to the United States.
  (e) Eligibility of Small Business Concerns.--A small business 
concern may be awarded a contract under this section only if 
the small business concern and the veteran owner of the small 
business concern are listed in the database of veteran-owned 
businesses maintained by the Secretary under subsection (f).
  (f) Database of Veteran-Owned Businesses.--(1) Subject to 
paragraphs (2) through (6), the Secretary shall maintain a 
database of small business concerns owned and controlled by 
veterans and the veteran owners of such business concerns.
          (2)(A) To be eligible for inclusion in the database, 
        such a veteran shall submit to the Secretary such 
        information as the Secretary may require with respect 
        to the small business concern or the veteran. 
        Application for inclusion in the database shall 
        constitute permission under section 552a of title 5 
        (commonly referred to as the Privacy Act) for the 
        Secretary to access such personal information 
        maintained by the Secretary as may be necessary to 
        verify the information contained in the application.
                  (B) If the Secretary receives an application 
                for inclusion in the database from an 
                individual whose status as a veteran cannot be 
                verified because the Secretary does not 
                maintain information with respect to the 
                veteran status of the individual, the Secretary 
                may not include the small business concern 
                owned and controlled by the individual in the 
                database maintained by the Secretary until the 
                Secretary receives such information as may be 
                necessary to verify that the individual is a 
                veteran.
          (3) Information maintained in the database shall be 
        submitted on a voluntary basis by such veterans.
          (4) No small business concern may be listed in the 
        database until the Secretary has verified that--
                  (A) the small business concern is owned and 
                controlled by veterans; and
                  (B) in the case of a small business concern 
                for which the person who owns and controls the 
                concern indicates that the person is a veteran 
                with a service-connected disability, that the 
                person is a veteran with a service-connected 
                disability.
          (5) The Secretary shall make the database available 
        to all Federal departments and agencies and shall 
        notify each such department and agency of the 
        availability of the database.
          (6) If the Secretary determines that the public 
        dissemination of certain types of information 
        maintained in the database is inappropriate, the 
        Secretary shall take such steps as are necessary to 
        maintain such types of information in a secure and 
        confidential manner.
          (8)(A) If a small business concern is not included in 
        the database because the Secretary does not verify the 
        status of the concern as a small business concern or 
        the ownership or control of the concern, the concern 
        may appeal the denial of verification to the Office of 
        Hearings and Appeals of the Small Business 
        Administration (as established under section 5(i) of 
        the Small Business Act). The decision of the Office of 
        Hearings and Appeals shall be considered a final agency 
        action.
                  (B)(i) If an interested party challenges the 
                inclusion in the database of a small business 
                concern owned and controlled by veterans or a 
                small business concern owned and controlled by 
                veterans with service-connected disabilities 
                based on the status of the concern as a small 
                business concern or the ownership or control of 
                the concern, the challenge shall be heard by 
                the Office of Hearings and Appeals of the Small 
                Business Administration as described in 
                subparagraph (A). The decision of the Office of 
                Hearings and Appeals shall be considered final 
                agency action.
                          (ii) In this subparagraph, the term 
                        ``interested party'' means--
                                  (I) the Secretary; or
                                  (II) in the case of a small 
                                business concern that is 
                                awarded a contract, the 
                                contracting officer of the 
                                Department or another small 
                                business concern that submitted 
                                an offer for the contract that 
                                was awarded to the small 
                                business concern that is the 
                                subject of a challenge made 
                                under clause (i).
                  (C) For each fiscal year, the Secretary shall 
                reimburse the Administrator of the Small 
                Business Administration in an amount necessary 
                to cover any cost incurred by the Office of 
                Hearings and Appeals of the Small Business 
                Administration for actions taken by the Office 
                under this paragraph. The Administrator is 
                authorized to accept such reimbursement. The 
                amount of any such reimbursement shall be 
                determined jointly by the Secretary and the 
                Administrator and shall be provided from fees 
                collected by the Secretary under multiple-award 
                schedule contracts. Any disagreement about the 
                amount shall be resolved by the Director of the 
                Office of Management and Budget.
  (g) Enforcement Penalties for Misrepresentation.--(1) Any 
business concern that is determined by the Secretary to have 
willfully and intentionally misrepresented the status of that 
concern as a small business concern owned and controlled by 
veterans or as a small business concern owned and controlled by 
service-disabled veterans for purposes of this subsection shall 
be debarred from contracting with the Department for a period 
of not less than five years.
          (2) In the case of a debarment under paragraph (1), 
        the Secretary shall commence debarment action against 
        the business concern by not later than 30 days after 
        determining that the concern willfully and 
        intentionally misrepresented the status of the concern 
        as described in paragraph (1) and shall complete 
        debarment actions against such concern by not later 
        than 90 days after such determination.
          (3) The debarment of a business concern under 
        paragraph (1) includes the debarment of all principals 
        in the business concern for a period of not less than 
        five years.
  (h) Treatment of Businesses After Death of Veteran-Owner.--
(1) Subject to paragraph (3), if the death of a veteran causes 
a small business concern to be less than 51 percent owned by 
one or more veterans, the surviving spouse of such veteran who 
acquires ownership rights in such small business concern shall, 
for the period described in paragraph (2), be treated as if the 
surviving spouse were that veteran for the purpose of 
maintaining the status of the small business concern as a small 
business concern owned and controlled by veterans.
          (2) The period referred to in paragraph (1) is the 
        period beginning on the date on which the veteran dies 
        and ending on the earliest of the following dates:
                  (A) The date on which the surviving spouse 
                remarries.
                  (B) The date on which the surviving spouse 
                relinquishes an ownership interest in the small 
                business concern.
                  (C) The date that is ten years after the date 
                of the veteran's death.
          (3) Paragraph (1) only applies to a surviving spouse 
        of a veteran with a service-connected disability rated 
        as 100 percent disabling or who dies as a result of a 
        service-connected disability.
  (i) Priority for Contracting Preferences.--Preferences for 
awarding contracts to small business concerns shall be applied 
in the following order of priority:
          (1) Contracts awarded pursuant to subsection (b), 
        (c), or (d) to small business concerns owned and 
        controlled by veterans with service-connected 
        disabilities.
          (2) Contracts awarded pursuant to subsection (b), 
        (c), or (d) to small business concerns owned and 
        controlled by veterans that are not covered by 
        paragraph (1).
          (3) Contracts awarded pursuant to--
                  (A) section 8(a) of the Small Business Act 
                (15 U.S.C. 637(a)); or
                  (B) section 31 of such Act (15 U.S.C. 657a).
          (4) Contracts awarded pursuant to any other small 
        business contracting preference.
  (j) Applicability of Requirements to Contracts.--(1) If after 
December 31, 2008, the Secretary enters into a contract, 
memorandum of understanding, agreement, or other arrangement 
with any governmental entity to acquire goods or services, the 
Secretary shall include in such contract, memorandum, 
agreement, or other arrangement a requirement that the entity 
will comply, to the maximum extent feasible, with the 
provisions of this section in acquiring such goods or services.
          (2) Nothing in this subsection shall be construed to 
        supersede or otherwise affect the authorities provided 
        under the Small Business Act (15 U.S.C. 631 et seq.).
  (k) Annual Reports.--Not later than December 31 each year, 
the Secretary shall submit to Congress a report on small 
business contracting during the fiscal year ending in such 
year. Each report shall include, for the fiscal year covered by 
such report, the following:
          (1) The percentage of the total amount of all 
        contracts awarded by the Department during that fiscal 
        year that were awarded to small business concerns owned 
        and controlled by veterans.
          (2) The percentage of the total amount of all such 
        contracts awarded to small business concerns owned and 
        controlled by veterans with service-connected 
        disabilities.
          (3) The percentage of the total amount of all 
        contracts awarded by each Administration of the 
        Department during that fiscal year that were awarded to 
        small business concerns owned and controlled by 
        veterans.
          (4) The percentage of the total amount of all 
        contracts awarded by each such Administration during 
        that fiscal year that were awarded to small business 
        concerns owned and controlled by veterans with service-
        connected disabilities.
  (l) Limitations on Subcontracting.--(1)(A) The requirements 
applicable to a covered small business concern under section 46 
of the Small Business Act (15 U.S.C. 657s) shall apply with 
respect to a small business concern owned and controlled by 
veterans that is awarded a contract under this section.
  (B) For purposes of applying the requirements of section 46 
of the Small Business Act (15 U.S.C. 657s) pursuant to 
subparagraph (A), the term ``similarly situated entity'' used 
in such section 46 includes a subcontractor for a small 
business concern owned and controlled by veterans described in 
such subparagraph (A).
  (2) The Secretary may award a contract under this section 
only after the Secretary obtains from the offeror a 
certification that the offeror will comply with the 
requirements described in paragraph (1)(A) if awarded the 
contract. Such certification shall--
          (A) specify the exact performance requirements 
        applicable under such paragraph; and
          (B) explicitly acknowledge that the certification is 
        subject to section 1001 of title 18.
  (3)(A) The Director of Small and Disadvantaged Business 
Utilization for the Department, established pursuant to section 
15(k) of the Small Business Act (15 U.S.C. 644(k)), and the 
Chief Acquisition Officer of the Department, established 
pursuant to section 1702 of title 41, shall jointly implement a 
process using the systems described in section 16(g)(2) of the 
Small Business Act (15 U.S.C. 645(g)(2)), and any other 
relevant systems available, to monitor compliance with this 
subsection.
  (B) The Director of Small and Disadvantaged Business 
Utilization and the Chief Acquisition Officer shall jointly 
refer any violations or suspected violations of this subsection 
to the Inspector General of the Department.
  (C) If the Secretary determines, in consultation with the 
Inspector General of the Department, that a small business 
concern that is awarded a contract under this section did not 
act in good faith with respect to the requirements described in 
paragraph (1)(A), the small business concern shall be subject 
to any or all of the following consequences--
          (i) referral to the Debarment and Suspension 
        Committee of the Department;
          (ii) a fine under section 16(g)(1) of the Small 
        Business Act (15 U.S.C. 645(g)(1)); and
          (iii) prosecution for violating section 1001 of title 
        18.
  (D) Not later than November 30 of each year, the Inspector 
General shall submit to the Committees on Veterans' Affairs of 
the Senate and House of Representatives a report for the fiscal 
year preceding the fiscal year during which the report is 
submitted that includes, for the fiscal year covered by the 
report--
          (i) the number of referred violations and suspected 
        violations received under subparagraph (B); and
          (ii) the disposition of such referred violations, 
        including the number of small business concerns 
        suspended or debarred from Federal contracting or 
        referred to the Attorney General for prosecution.
  [(l)] (m) Definitions.--In this section:
          (1) The term ``small business concern'' has the 
        meaning given that term under section 3 of the Small 
        Business Act (15 U.S.C. 632).
          (2) The term ``small business concern owned and 
        controlled by veterans'' means a small business 
        concern--
                  (A)(i) not less than 51 percent of which is 
                owned by one or more veterans or, in the case 
                of a publicly owned business, not less than 51 
                percent of the stock of which is owned by one 
                or more veterans; and
                          (ii) the management and daily 
                        business operations of which are 
                        controlled by one or more veterans; or
                  (B) not less than 51 percent of which is 
                owned by one or more veterans with service-
                connected disabilities that are permanent and 
                total who are unable to manage the daily 
                business operations of such concern or, in the 
                case of a publicly owned business, not less 
                than 51 percent of the stock of which is owned 
                by one or more such veterans.

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