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TITLE XVI--INDUSTRIAL BASE MATTERS

Subtitle C--Matters Relating to Small Business Concerns

P. L. 112-

House Conference Report 112-705

SEC. 1651. LIMITATIONS ON SUBCONTRACTING.

The Small Business Act (15 U.S.C. 631 et seq.) is amended by inserting before section 47 (as redesignated by section 1641 of this subtitle) the following:

`SEC. 46. LIMITATIONS ON SUBCONTRACTING.

`(a) In General- If awarded a contract under section 8(a), 8(m), 15(a), 31, or 36, a covered small business concern--

`(1) in the case of a contract for services, may not expend on subcontractors more than 50 percent of the amount paid to the concern under the contract;

`(2) in the case of a contract for supplies (other than from a regular dealer in such supplies), may not expend on subcontractors more than 50 percent of the amount, less the cost of materials, paid to the concern under the contract;

`(3) in the case of a contract described in paragraphs (1) and (2)--

`(A) shall determine for which category, services (as described in paragraph (1)) or supplies (as described in paragraph (2)), the greatest percentage of the contract is awarded;

`(B) shall determine the amount awarded under the contract for that category of services or supplies; and

`(C) may not expend on subcontractors, with respect to the amount determined under subparagraph (B), more than 50 percent of that amount; and

`(4) in the case of a contract for supplies from a regular dealer in such supplies, shall supply the product of a domestic small business manufacturer or processor, unless a waiver of such requirement is granted--

`(A) by the Administrator, after reviewing a determination by the applicable contracting officer that no small business manufacturer or processor can reasonably be expected to offer a product meeting the specifications (including period for performance) required by the contract; or

`(B) by the Administrator for a product (or class of products), after determining that no small business manufacturer or processor is available to participate in the Federal procurement market.

`(b) Similarly Situated Entities- Contract amounts expended by a covered small business concern on a subcontractor that is a similarly situated entity shall not be considered subcontracted for purposes of determining whether the covered small business concern has violated a requirement established under subsection (a) or (d).

`(c) Modifications of Percentages- The Administrator may change, by rule (after providing notice and an opportunity for public comment), a percentage specified in paragraphs (1) through (4) of subsection (a) if the Administrator determines that such change is necessary to reflect conventional industry practices among business concerns that are below the numerical size standard for businesses in that industry category.

`(d) Other Contracts-

`(1) IN GENERAL- With respect to a category of contracts to which a requirement under subsection (a) does not apply, the Administrator is authorized to establish, by rule (after providing notice and an opportunity for public comment), a requirement that a covered small business concern may not expend on subcontractors more than a specified percentage of the amount paid to the concern under a contract in that category.

`(2) UNIFORMITY- A requirement established under paragraph (1) shall apply to all covered small business concerns.

`(3) CONSTRUCTION PROJECTS- The Administrator shall establish, through public rulemaking, requirements similar to those specified in paragraph (1) to be applicable to contracts for general and specialty construction and to contracts for any other industry category not otherwise subject to the requirements of such paragraph. The percentage applicable to any such requirement shall be determined in accordance with paragraph (1).

`(e) Definitions- In this section, the following definitions apply:

`(1) COVERED SMALL BUSINESS CONCERN- The term `covered small business concern' means a business concern that--

`(A) with respect to a contract awarded under section 8(a), is a small business concern eligible to receive contracts under that section;

`(B) with respect to a contract awarded under section 8(m)--

`(i) is a small business concern owned and controlled by women (as defined in that section); or

`(ii) is a small business concern owned and controlled by women (as defined in that section) that is not less than 51 percent owned by 1 or more women who are economically disadvantaged (and such ownership is determined without regard to any community property law);

`(C) with respect to a contract awarded under section 15(a), is a small business concern;

`(D) with respect to a contract awarded under section 31, is a qualified HUBZone small business concern; or

`(E) with respect to a contract awarded under section 36, is a small business concern owned and controlled by service-disabled veterans.

`(2) SIMILARLY SITUATED ENTITY- The term `similarly situated entity' means a subcontractor that--

`(A) if a subcontractor for a small business concern, is a small business concern;

`(B) if a subcontractor for a small business concern eligible to receive contracts under section 8(a), is such a concern;

`(C) if a subcontractor for a small business concern owned and controlled by women (as defined in section 8(m)), is such a concern;

`(D) if a subcontractor for a small business concern owned and controlled by women (as defined in section 8(m)) that is not less than 51 percent owned by 1 or more women who are economically disadvantaged (and such ownership is determined without regard to any community property law), is such a concern;

`(E) if a subcontractor for a qualified HUBZone small business concern, is such a concern; or

`(F) if a subcontractor for a small business concern owned and controlled by service-disabled veterans, is such a concern.'.

 		Limitations on subcontracting (sec. 1651)

The House bill contained a provision (sec. 1651) that would clarify statutory requirements limiting the extent to which work awarded pursuant to a small business contract may be performed by subcontractors.

The Senate amendment contained no similar provision.

The Senate recedes with a clarifying amendment.

House Report 112-479

SECTION 1651--LIMITATIONS ON SUBCONTRACTING

This section would amend the Small Business Act (15 U.S.C. 631) by changing the limitations on subcontracting by small business concerns from cost to price and by allowing, in case of a contract that combines services, construction or supplies, the limitation on subcontracting to be determined by the category that is the greatest percentage of the contract amount. This section would also require that amounts expended by a covered small business concern on a subcontractor that is a similarly situated entity shall not be used in the determination of the subcontracting limitations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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