[House Report 107-432]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-432
======================================================================
SMALL BUSINESS OPPORTUNITY ENHANCEMENT ACT
OF 2001
_______
May 2, 2002.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Manzullo, from the Committee on Small Business, submitted the
following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 2867]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business, to whom was referred the
bill (H.R. 2867) to amend the Small Business Act to require the
Administrator to submit certain disagreements to the Director
of the Office of Management and Budget for resolution, and to
establish a minimum period for the solicitation of offers for a
bundled contract, having considered the same, report favorably
thereon without amendment and recommend that the bill do pass.
Purpose of Legislation
The purpose of this legislation is to amend the Small
Business Act to require the Administrator of the Small Business
Administration to submit certain disagreements involving small
business concerns to the Director of the Office of Management
and Budget for resolution, and to establish a minimum period of
sixty days for small businesses to respond to a solicitation
for offers with respect to a bundled contract.
Background and Need for Legislation
The vital nature of the small business community to the
economy can be statistically validated. Small businesses
account for more than 50 percent of the Gross Domestic Product
and have proved more innovative than big businesses. In times
of economic decline, small businesses have been job-creators
and have led the economy out of economic hard times.
Many of the large technology and computer companies that
have made this Nation a world leader in science and technology
started as two or three person firms. One of the fastest
growing sectors of our economy is small business concerns owned
and controlled by women and by socially and economically
disadvantaged individuals.
The federal procurement system has historically been a
prolific and competitive source of growth for small businesses.
This is understandable since the federal government is the
largest buyer of goods and services in the world, with $200
billion in purchases for fiscal year 2000.
Unfortunately, in the rush to streamline the federal
procurement system, the importance of small business concerns
to the federal marketplace has been neglected. In recent years,
federal agencies have combined requirements, previously
provided by small businesses, into enormous, mega-contracts,
that only large corporations can bid on as prime contractors.
The result of resorting to mega-contracts has been a less
competitive marketplace and a steady decline in the number of
prime contracts going to small businesses. In his speech of
March 19, 2002, to the Women's Entrepreneurship in the 21st
Century Summit, the President emphasized that ``government
contracting must be open and more fair to small businesses.''
However, he pointed out that the use by federal agencies of
mega-contracts was the major hurdle impeding small business
from realizing the President's goal of ``more ownership in more
communities all across America.'' In this respect the President
stated:
But you know as well as I do that there are some
large hurdles for small businesses. One is that--and
the main one is--that agencies sometimes, many times,
only let huge contracts with massive requirements, and
they tend to go to the same group of large corporate
bidders. * * * [T]he term of art in Washington is
called bundling. It effectively excludes small
businesses. And we need to do something about it.
The President has assigned to the head of the Office of
Management and Budget the task of reviewing the federal
procurement process and the responsibility of finding ways ``to
encourage entrepreneurial growth, the capacity for our
government to stimulate small business ownership in all
communities across America.'' Specifically, the President
stated:
And so one of the things we're going to do is we're
going to examine the federal government's contracting
policies; to make sure the process is open; to make
sure the process helps to achieve a noble objective,
which is more ownership in our country. And wherever
possible, we're going to insist we break down large
federal contracts so that small business owners have
got a fair shot at federal contracting.
H.R. 2867 is bipartisan legislation, in line with the
President's Small Business Plan, and assigns to the Office of
Management and Budget the ultimate responsibility of
determining whether a mega-contract is fair to small businesses
and is in the best interests of the Nation. It also provides
more time for small businesses to respond to a bundled
contract, an essential element to forming teams of small
business who will have an opportunity to compete.
This legislation is necessary to restore needed competition
to the federal marketplace and to reduce use by federal
agencies of mega-contracts which the President has identified
as the major hurdle to restoring openness and fairness to small
business in the federal marketplace.
Summary of Legislation
The present provisions of the Small Business Act permit the
Administrator of the Small Business Administration to appeal to
the Secretary or head of the appropriate department or agency
when a proposed acquisition (usually a mega-contract) will
render small business prime contract participation unlikely and
efforts to resolve the issues involved have failed at a lower
level.
Instead of appealing to the head of the procurement agency
or department, the legislation requires the Administrator of
the Small Business Administration to appeal to the Director of
the Office of Management and Budget, who must render a timely
decision. The Director may delegate his decisional
responsibilities, but only to a subordinate official within the
Office of Management and Budget appointed by the President,
with the advice and consent of the Senate.
Requiring an appeal to the Director of the Office of
Management and Budget is both logical and fair. The present
provisions of the Small Business Act make the department or
agency head the final arbiter. This is hardly a fair approach
since there is a natural tendency for a department or agency
head to rubber stamp the decision of subordinate officials.
A required appeal to the Director of the Office of
Management and Budget restores fairness to the process and
ensures that decisions will have some degree of continuity,
rather than being on an agency-by-agency basis. Further, it
provides the President with the opportunity to resolve, at the
highest level the problem of mega-contracts, and to provide a
basis for realizing his objective of more ownership for all
America.
In addition, the legislation gives small businesses more
time, i.e., a minimum of sixty days to respond and bid on a
procurement that is admittedly bundled. Current law gives small
businesses only 30 days to respond. The 60-day response period
that this legislation would provide is the minimum time to
permit small business to join with other small business to
compete for a contract that one small business could not alone
perform.
Committee Action
The Committee has held recent hearings concerning the
procurement practices of the federal government. On May 2,
2001, the Committee held a hearing entitled: ``Black Beret
Procurement; Business as Usual at the Pentagon.'' On June 20,
2001, the Committee held a hearing entitled: ``Procurement
Policies of the Pentagon with respect to Small Businesses and
the New Administration.'' The Committee held three additional
hearings with respect to federal procurement issues. The first
in Santa Fe, New Mexico, on August 27, 2001, was entitled:
``Small Business Views on Federal Procurement and other
Programs.'' The second the same day in Albuquerque, New Mexico,
was entitled: ``Challenges that Small, Disadvantaged, and
Minority Business Owners Face in the Federal Procurement
Arena.'' The third hearing was on September 6, 2001, and was
entitled: ``Procurement Policies of the Department of Defense
with Regard to Small Businesses--Finding Solutions to Problems
that Exist.''
H.R. 2867 was introduced by Nydia M. Velazquez (D-NY),
Ranking Democratic Member of the Committee on Small Business,
on September 6, 2001, and was referred to the Committee on
Small Business. On April 17, 2002, the Committee on Small
Business met to consider the bill. There were no amendments.
The bill was ordered favorably reported by voice vote.
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 legislation. There was no
recorded vote taken in connection with ordering H.R. 2867
reported.
Committee Oversight Findings
With respect to the requirements of clause 3(c)(1) of rule
XIII of the Rules of the House of Representatives, the
Committee's oversight findings are reflected in this report.
New Budget Authority, Entitlement Authority, and Tax Expenditures
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives, and section
308(a) of the Congressional Budget Act of 1974, the Committee
references the report of the Congressional Budget Office
included below.
Statement of General Performance Goals and Objectives
With respect to the requirements of clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives, the
performance goals and objectives of this legislation are to:
(a) stimulate growth of small business and to increase
ownership throughout the Nation; (b) break down large federal
procurements so that the small business community has a fair
chance to win and perform them; and, (c) empower small
businesses to go after mega-contracts by permitting at least
sixty days for small business to respond to procurements that
are identified as bundled.
Statement of Congressional Budget Office Estimate
With respect to the requirements of clause 3(c)(3) of rule
XIII of the rules of the House of Representatives and section
402 of the Congressional Budget Act of 1974, the Committee has
received the cost estimate for H.R. 2867 from the Director of
the Congressional Budget Office as follows:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 29, 2002.
Hon. Donald Manzullo,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2867, the Small
Business Opportunity Enhancement Act of 2001.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 2867--Small Business Opportunity Enhancement Act of 2001
H.R. 2867 would amend the Small Business Act to require the
Small Business Administration (SBA) to report contracting
disputes between itself and other federal agencies to the
Office of Management and Budget (OMB) for resolution. Such
disputes are currently resolved by each contracting agency. In
addition, the bill also would increase the solicitation period
for bundled contracts (multiple contracts combined into a
single procurement contract) from 30 days to at least 60 days.
CBO estimates that implementing H.R. 2867 would cost less
than $500,000 a year, subject to the availability of
appropriated funds. There is no comprehensive information
concerning the annual number of contract disputes involving SBA
and other federal agencies, but CBO does not expect that the
requirements of this bill would lead to significant increased
costs for the OMB. In addition, CBO expects the new minimum 60-
day solicitation period for bundled contracts would have no
significant cost. Because the bill would not affect direct
spending or receipts, pay-as-you-go procedures would not apply.
H.R. 2867 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect state, local, or tribal governments.
The CBO staff contact for this estimate is Matthew
Pickford. This estimate was approved by Peter H. Fontaine,
Deputy Assistant Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Preemption Clarification
Section 423 of the Congressional Budget Act of 1994
requires the report of any committee on a bill or joint
resolution to include a statement of the extent to which the
bill, or joint resolution is intended to preempt state, local,
or tribal law. This bill involves federal agency transactions
under federal law, and does not preempt any state, local, or
tribal law.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional authority for this legislation is provided in
Article I, section 8 of the Constitution of the United States,
which grants to Congress the power to enact this bill.
Applicability to Legislative Branch
The Committee finds that the legislation 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.
Section-by-Section Analysis of the Legislation
Section 1. Short title
The short title is the ``Small Business Opportunity
Enhancement Act of 2001.''
Section 2. Submission of certain disagreements to the Director of the
Office of Management and Budget
The section would amend the Small Business Act to require
the Administrator of the Small Business Administration to
submit a dispute to the Director of the Office of Management
and Budget where the Administrator and the contracting
procurement department or agency are unable to agree and the
Administrator believes the procurement, as proposed, will
render small business prime contract participation unlikely.
The Director of the Office of Management and Budget must
make a decision with respect to a disagreement within 10 days
after receiving the matter. The Director may not delegate his
responsibilities with respect to making a decision, except to a
subordinate official nominated by the President, and confirmed
by and with the advice and consent of the Senate.
Section 3. Minimum period for solicitation of offers for a bundled
contract
The section would amend the Small Business Act to require
that small businesses be permitted no less than sixty days,
beginning on the date the solicitation is issued, to respond to
a solicitation for offers with respect to a contract that is
bundled.
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 (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
SECTION 15 OF THE SMALL BUSINESS ACT
Sec. 15. (a) * * *
* * * * * * *
(e) Procurement Strategies; Contract Bundling.--
(1) * * *
* * * * * * *
(5) Minimum solicitation period.--In the case of a
solicitation of offers for a bundled contract that is
issued by the head of an agency, small business
concerns shall be allowed to submit offers for a period
of not less than 60 days beginning on the date the
solicitation is issued.
* * * * * * *
ADDITIONAL VIEWS
Democratic Members of the Committee on Small Business have
focused significant legislative energy on ensuring that small
businesses are fully empowered to participate in the federal
marketplace. Although small businesses account for well over 95
percent of businesses nationwide, small businesses receive less
than their fair share of federal contract dollars, despite
goals put in place by Congress to encourage small business
participation.
Further, as highlighted in reports issued by the Democratic
Members of the Committee on Small Business in July 2000 and
September 2001, the number of contracts awarded to small
businesses has decreased over the past several years, while the
dollar amount of contracts is increasing. In short, the
contracts are getting larger, and there are fewer opportunities
for small businesses.
This legislation attempts to increase small business
participation in the federal marketplace. First, the bill
enhances the Small Business Administration's (SBA's) ability to
negotiate with Federal agencies, prior to the issuance of draft
or final solicitation for bid, to break up large contracts into
smaller pieces. Secondly, the bill provides additional time to
small businesses that bid on contracts meeting the definition
of ``bundling'' as outlined in Section 3 of the Small Business
Act.
Currently, the SBA has limited authority to recommend that
agencies split large contracts into smaller pieces to increase
small business participation as prime contractors. Under the
current statute, the SBA has the authority to appeal a
procurement strategy back to the agency that developed the
original strategy. The implementing regulations have set in
place two-phased appeal process. The SBA's first appeal is to
the head of the contracting activity. The second appeal is to
the Secretary--(or equivalent) level of the agency. The SBA's
appeal authority occurs prior to the issuance of the draft or
final solicitation for bids by the agency, as part of the
development of a procurement strategy for a solicitation issued
by the agency for a proposed acquisition.
This legislation enhances the SBA's stature by giving the
authority to the SBA to appeal the agency's final decision to
the Office of Management and Budget (OMB). It is the intention
of the author of this legislation, Ms. Velazquez, that the
current two-phased agency appeal process shall remain in place,
with the appeal to the Office of Management and Budget (OMB)
being the appeal of last resort. If the SBA is satisfied,
through either negotiations with procurement or lower level
appeals, that they have negotiated a procurement strategy
ensuring opportunities for small businesses to compete as prime
contractors on the proposed acquisition, the SBA is not
required to appeal to OMB. It is the goal of the author that
all appeals of agency acquisition strategies by the SBA shall
occur prior to the issuance of a draft or final solicitation
for bids by the agency. The author wants it clarified that
agencies not issue draft or final solicitations prior to the
completion of negotiations with the SBA, or until SBA's final
appeal to OMB is exhausted, on the procurement strategy for any
proposed acquisition.
This provision is further intended to ensure that the SBA
look at ways to not only increase federal contract dollars to
small businesses, but to also to increase the number of prime
contracting opportunities for small businesses.
The legislation also allows small businesses 60 days to bid
on bundled contracts. Historically, agencies have only allowed
30 days for businesses to bid on federal contracts. When it
comes to bundled contracts, by definition, they are too large
for a small business to perform on its own. Small businesses
can only perform on bundled contracts as prime contractors, if
they ``team'' with other businesses.
Through regulation, the SBA has ensured that affiliation
rules do not apply to small businesses bidding as teams. As
long as each business is small, according to SBA's size
standards, the ``team'' may be considered small. However, the
SBA had not assisted small businesses in identifying potential
team members, other than through its PRO-Net database.
In order to ``team,'' small businesses must identify
qualified team members, decide which team member is going to
perform what function, formalize the team through a potential
joint venture or subcontracting arrangement, and put together a
price. It is simply not reasonable for most small businesses to
accomplish this in 30 days--the standard bid period for federal
contracts.
Therefore, this legislation provides additional time for
small businesses. The author of the legislation, Ms. Velazquez,
wants it clarified that there is no intention in this bill to
provide 60 days for the submission of bids on all bundled
contracts. Rather, only those small businesses that have
expressed interest may received an additional 30 days.
Expressions of interest by small businesses, for this purpose,
must be to the agency contracting officer and must be in
writing. It is the author's intention that large businesses
submitting bids after the initial 30-day bid period, shall not
be considered timely.
No discussion of the SBA's role in the federal procurement
process would be complete without including the SBA's
Procurement Center Representatives (PCRs). These individuals
are the ``front line'' with respect to ensuring that small
business have full access of the federal marketplace. The PCRs
are the SBA employees charged with negotiating procurement
strategies, that are inclusive of small business with federal
agencies. The PCR initiates the first appeal to the head of the
contracting activity when negotiations are unsuccessful.
The SBA continues to disregard the importance of this
employee function. Rather than providing adequate personnel to
protect the interests of small businesses in the federal
marketplace, the SBA consistently fails to fill vacant position
in a timely manner, and request adequate funding for these
individuals to perform their jobs. PCRs cannot effectively
advocate for small businesses from behind a desk. These
employees must have the ability to visit agencies on a
consistent basis to ensure that the PCR is aware of the
agency's procurement activities and able to identify contracts
for small business participation.
In order to conserve costs, the SBA has housed several PCRs
at agency offices. Although this can result in increased access
by PCRs to agency procurements, there remains a question as to
whether this can disrupt the arm's length negotiations between
the agency and the PCR that are most effective for small
businesses.
Democrats remain skeptical about the SBA's cost cutting
measures intended to make PCRs more effective, including
increased use of electronic commerce. Democratic Members of the
Committee have been vigilant over the past several years on the
issue of prime contracting opportunities for small businesses
in the federal marketplace. As a result, Committee Democrats
recognize the important role that PCRs play in ensuring
adequate small business participation. The effectiveness of the
role of the PCRs diminishes in proportion to the lack of
resources the SBA provides to this important function.
To conclude, issues of federal procurement and the
inclusion of small businesses in the multi-billion dollar
federal marketplace have been a priority with Democrats on the
Committee. Reports issued by the Democrats have shown that
small businesses, and especially minority- and women-owned
small businesses, still do not receive that fair share of
federal prime contracts. The reports also showed that mega
contracts are, in large part, the primary issues affecting
small businesses in federal procurement. After nearly five
years of statutory protections afforded small businesses by the
Small Business Reauthorization Act of 1997, it is clear that
more can be done. The time has come to close the loopholes and
allow small businesses the equity that they deserve in the
Federal marketplace.
Nydia M. Velazquez.