Public Law 86-636 (Small Business Act of 1998, amended May 25, 2007)

This compilation includes
PL 110-28, approved 5/25/07.

SMALL BUSINESS ACT
(Public Law 85-536, as amended)

§ 1.

This Act may be cited as the "Small Business Act".

§ 2.
(a)
The essence of the American economic system of private enterprise is free
competition. Only through full and free competition can free markets, free entry into business,
and opportunities for the expression and growth of personal initiative and individual judgment be
assured. The preservation and expansion of such competition is basic not only to the economic
well-being but to the security of this Nation. Such security and well-being cannot be realized
unless the actual and potential capacity of small business is encouraged and developed. It is the
declared policy of the Congress that the Government should aid, counsel, assist, and protect,
insofar as is possible, the interests of small-business concerns in order to preserve free
competitive enterprise, to insure that a fair proportion of the total purchases and contracts or
subcontracts for property and services for the Government (including but not limited to contracts
or subcontracts for maintenance, repair, and construction) be placed with small business
enterprises, to insure that a fair proportion of the total sales of Go vernment property be made to
such enterprises, and to maintain and strengthen the overall economy of the Nation.
(b)
(1)
It is the declared policy of the Congress that the Federal Government,
through the Small Business Administration, acting in cooperation with the Department of
Commerce and other relevant State and Federal agencies, should aid and assist small businesses,
as defined under this Act, to increase their ability to compete in international markets by—
(A)

enhancing their ability to export;

(B)

facilitating technology transfers;

(C)

enhancing their ability to compete effectively and efficiently

against imports;
(D)
increasing the access of small businesses to long-term capital for
the purchase of new plant and equipment used in the production of goods and services involved
in international trade;
(E)
disseminating information concerning State, Federal, and private
programs and initiatives to enhance the ability of small businesses to compete in international
markets; and

SMALL BUSINESS ACT

(F)
ensuring that the interests of small businesses are adequately
represented in bilateral and multilateral trade negotiations.
(2)
The Congress recognizes that the Department of Commerce is the
principal Federal agency for trade development and export promotion and that the Department of
Commerce and the Small Business Administration work together to advance joint interests. It is
the purpose of this Act to enhance, not alter, their respective roles.
(c)
It is the declared policy of the Congress that the Government, through the Small
Business Administration, should aid and assist small business concerns which are engaged in the
production of food and fiber, ranching, and raising of livestock, aquaculture, and all other
farming and agricultural related industries; and the financial assistance programs authorized by
this Act are also to be used to assist such concerns.
(d)
(1)
The assistance programs authorized by sections 7(i) and 7(j) of this Act
are to be utilized to assist in the establishment, preservation, and strengthening of small business
concerns and improve the managerial skills employed in such enterprises, with special attention
to small business concerns (1) located in urban or rural areas with high proportions of
unemployed or low- income individuals; or (2) owned by low- income individuals; and to
mobilize for these objectives private as well as public managerial skills and resources.
(2)
(A)
the Congress finds—

With respect to the programs authorized by section 7(j) of this Act,

(i)
that ownership and control of productive capital is
concentrated in the economy of the United States and certain groups, therefore, own and control
little productive capital;
(ii)
that certain groups in the United States own and control
little productive capital because they have limited opportunities for small business ownership;
(iii)
that the broadening of small business ownership among
groups that presently own and control little productive capital is essential to provide for the
well-being of this Nation by promoting their increased participation in the free enterprise system
of the United States;
(iv)
that such development of business ownership among
groups that presently own and control little productive capital will be greatly facilitated through
the creation of a small business ownership development program, which shall provide services,
including, but not limited to, financial, management, and technical assistance.
(v)
that the power to let Federal contracts pursuant to section
8(a) of the Small Business Act can be an effective procurement assistance tool for development
of business ownership among groups that own and control little productive capital; and

2

SMALL BUSINESS ACT

(vi)
that the procurement authority under section 8(a) of the
Small Business Act shall be used only as a tool for developing business ownership among groups
that own and control little productive capital.
(B)

It is therefore the purpose of the programs authorized by section

7(j) of this Act to—
(i)
foster business ownership and development by individuals
in groups that own and control little productive capital; and
(ii)
promote the competitive viability of such firms in the
marketplace by creating a small business and capital ownership development program to provide
such available financial, technical, and management assistance as may be necessary.
(e)
Further, it is the declared policy of the Congress that the Government should aid
and assist victims of floods and other catastrophes, and small-business concerns which are
displaced as a result of federally aided construction programs.
(f)
(1)
Congress finds—

With respect to the Administration's business development programs the

(A)
that the opportunity for full participation in our free enterprise
system by socially and economically disadvantaged persons is essential if we are to obtain social
and economic equality for such persons and improve the functioning of our national economy;
(B)
that many such persons are socially disadvantaged because of their
identification as members of certain groups that have suffered the effects of discriminatory
practices or similar invidious circumstances over which they have no control;
(C)
that such groups include, but are not limited to, Black Americans,
Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, Native
Hawaiian Organizations, and other minorities;
(D)
that it is in the national interest to expeditiously ameliorate the
conditions of socially and economically disadvantaged groups;
(E)
that such conditions can be improved by providing the maximum
practicable opportunity for the development of small business concerns owned by members of
socially and economically disadvantaged groups;
(F)
that such development can be materially advanced through the
procurement by the United States of articles, equipment, supplies, services, materials, and
construction work from such concerns; and

3

SMALL BUSINESS ACT

(G)
that such procurements also benefit the United States by
encouraging the expans ion of suppliers for such procurements, thereby encouraging competition
among such suppliers and promoting economy in such procurements.
(2)

It is, therefore, the purpose of section 8(a) to—

(A)
promote the business development of small business concerns
owned and controlled by socially and economically disadvantaged individuals so that such
concerns can compete on an equal basis in the American economy;
(B)
promote the competitive viability of such concerns in the
marketplace by providing such available contract, financial, technical, and management
assistance as may be necessary; and
(C)
clarify and expand the program for the procurement by the United
States of articles, equipment, supplies, services, materials, and construction work from small
business concerns owned by socially and economically disadvantaged individuals.
(g)
In administering the disaster loan program authorized by section 7 of this Act, to
the maximum extent possible, the Administration shall provide assistance and counseling to
disaster victims in filing applications, providing information relevant to loan processing, and in
loan closing and prompt disbursement of loan proceeds and shall give the disaster program a
high priority in allocating funds for administrative expenses.
(h)
(1)
With respect to the programs and activities authorized by this Act, the
Congress finds that—
(A)
women owned business has become a major contributor to the
American economy by providing goods and services, revenues, and jobs;
(B)
over the past two decades there have been substantial gains in the
social and economic status of women as they have sought economic equality and independence;
(C)
despite such progress, women, as a group, are subjected to
discrimination in entrepreneurial endeavors due to their gender;
(D)
such discrimination takes many overt and subtle forms adversely
impacting the ability to raise or secure capital, to acquire managerial talents, and to capture
market opportunities;
(E)
it is in the national interest to expeditiously remove discriminatory
barriers to the creation and development of small business concerns owned and controlled by
women;

4

SMALL BUSINESS ACT

(F)
the removal of such barriers is essential to provide a fair
opportunity for full participation in the free enterprise system by women and to further increase
the economic vitality of the Nation;
(G)
increased numbers of small business concerns owned and
controlled by women will directly benefit the United States Government by expanding the
potential number of suppliers of goods and services to the Government; and
(H)
programs and activities designed to assist small business concerns
owned and controlled by women must be implemented in such a way as to remove such
discriminatory barriers while not adversely affecting the rights of socially and economically
disadvantaged individuals.
(2)
It is, therefore, the purpose of those programs and activities conducted
under the authority of this Act that assist women entrepreneurs to-(A)
vigorously promote the legitimate interests of small business
concerns owned and controlled by women;
(B)
remove, insofar as possible, the discriminatory barriers that are
encountered by women in accessing capital and other factors of production; and
(C)
require that the Government engage in a systematic and sustained
effort to identify, define and analyze those discriminatory barriers facing women and that such
effort directly involve the participation of women business owners in the public/private sector
partnership.
(i)
PROHIBITION ON THE USE OF FUNDS FOR INDIVIDUALS NOT
LAWFULLY WITHIN THE UNITED STATES.—None of the funds made available pursuant to
this Act may be used to provide any direct benefit or assistance to any individual in the United
States if the Administrator or the official to which the funds are made available receives
notification that the individual is not lawfully within the United States.
(j)
CONTRACT BUNDLING.—In complying with the statement of congressional
policy expressed in subsection (a), relating to fostering the participation of small business
concerns in the contracting opportunities of the Government, each Federal agency, to the
maximum extent practicable, shall—
(1)
comply with congressional intent to foster the participation of small
business concerns as prime contractors, subcontractors, and suppliers;
(2)
structure its contracting requirements to facilitate competition by and
among small business concerns, taking all reasonable steps to eliminate obstacles to their
participation; and

5

SMALL BUSINESS ACT

(3)
avoid unnecessary and unjustified bundling of contract requirements that
precludes small business participation in procurements as prime contractors.
§3
(a)
(1)
For the purposes of this Act, a small-business concern, including but not
limited to enterprises that are engaged in the business of production of food and fiber, ranching
and raising of livestock, aquaculture, and all other farming and agricultural related industries,
shall be deemed to be one which is independently owned and operated and which is not
dominant in its field of operation: Provided, That notwithstanding any other provision of law, an
agricultural enterprise shall be deemed to be a small business concern if it (including its
affiliates) has annual receipts not in excess of $750,000.
(2)

ESTABLISHMENT OF SIZE STANDARDS.—

(A)
IN GENERAL.—In addition to the criteria specified in paragraph
(1), the Administrator may specify detailed definitions or standards by which a business concern
may be determined to be a small business concern for the purposes of this Act or any other Act.
(B)
ADDITIONAL CRITERIA.—The standards described in
paragraph (1) may utilize number of employees, dollar volume of business, net worth, net
income, a combination thereof, or other appropriate factors.
(C)
REQUIREMENTS.—Unless specifically authorized by statute, no
Federal department or agency may prescribe a size standard for categorizing a business concern
as a small business concern, unless such proposed size standard—
(i)

is proposed after an opportunity for public notice and

(ii)

provides for determining—

comment;

(I)
the size of a manufacturing concern as measured by
the manufacturing concern's average employment based upon employment during each of the
manufacturing concern's pay periods for the preceding 12 months;
(II)
the size of a business concern providing services on
the basis of the annual average gross receipts of the business concern over a period of not less
than 3 years;
(III) the size of other business concerns on the basis of
data over a period of not less than 3 years; or
(IV)
(iii)

other appropriate factors; and

is approved by the Administrator.

6

SMALL BUSINESS ACT

(3)
When establishing or approving any size standard pursuant to paragraph
(2), the Administrator shall ensure that the size standard varies from industry to industry to the
extent necessary to reflect the differing characteristics of the various industries and consider
other factors deemed to be relevant by the Administrator.
(4)
EXCLUSION OF CERTAIN SECURITY EXPENSES FROM
CONSIDERATION FOR PURPOSE OF SMALL BUSINESS SIZE STANDARDS.—
(A)
DETERMINATION REQUIRED.—Not later than 30 days after
the date of enactment of this paragraph, the Administrator shall review the application of size
standards established pursuant to paragraph (2) to small business concerns that are performing
contracts in qualified areas and determine whether it would be fair and appropriate to exclude
from consideration in the average annual gross receipts of such small business concerns any
payments made to such small business concerns by Federal agencies to reimburse such small
business concerns for the cost of subcontracts entered for the sole purpose of providing security
services in a qualified area.
(B)
ACTION REQUIRED.—not later than 60 days after the date of
enactment of this paragraph, the Administrator shall either—
(i)
initiate an adjustment to the size standards, as described in
subparagraph (A), if the Administrator determines that suc h an adjustment would be fair and
appropriate; or
(ii)
provide a report to the Committee on Small Business
Entrepreneurship of the Senate and the Committee on Small Business of the House of
Representatives explaining in detail the basis for the determination by the Administrator that
such an adjustment would not be fair and appropriate.
(C)

QUALIFIED AREAS.—In this paragraph, the term “qualified

area” means—
(i)

Iraq,

(ii)

Afghanistan, and

(iii)
any foreign country which included a combat zone, as that
term is defined in section 112(c)(2) of the Internal Revenue Code of 1986, at the time of
performance of the relevant Federal contract or subcontract.
(b)
for purposes of this Act, any reference to an agency or department of the United
States, and the term " Federal agency", shall have the meaning given the term "agency" by
section 551(1) of title 5, United States Code, but does not include the United States Postal
Service or the General Accounting Office.

7

SMALL BUSINESS ACT

(c)
(1)
For purposes of this Act, a qualified employee trust shall be eligible for
any loan guarantee under section 7(a) with respect to a small business concern on the same basis
as if such trust were the same legal entity as such concern.
(2)
For purposes of this Act, the term "qualified employee trust" means, with
respect to a small business concern, a trust—
(A)
which forms part of an employee stock ownership plan (as defined
in section 4975(e)(7) of the Internal Revenue Code of 1954)—
(i)

which is maintained by such concern, and

(ii)
which provides that each participant in the plan is entitled
to direct the plan as to the manner in which voting rights under qualifying employer securities (as
defined in section 4975(e)(8) of such Code) which are allocated to the account of such
participant are to be exercised with respect to a corporate matter which (by law or charter) must
be decided by a majority vote of outstanding common shares voted; and
(B)
in the case of any loan guarantee under section 7(a), the trustee of
which enters into an agreement with the Administrator which is binding on the trust and on such
small business concern and which provides that—
(i)
the loan guaranteed under section 7(a) shall be used solely
for the purchase of qualifying employer securities of such concern,
(ii)
all funds acquired by the concern in such purchase shall be
used by such concern solely for the purposes for which such loan was guaranteed,
(iii)
such concern will provide such funds as may be necessary
for the timely repayment of such loan, and the property of such concern shall be available as
security for repayment of such loan, and
(iv)
all qualifying employer securities acquired by such trust in
such purchase shall be allocated to the accounts of partic ipants in such plan who are entitled to
share in such allocation, and each participant has a nonforfeitable right, not later than the date
such loan is repaid, to all such qualifying employer securities which are so allocated to the
participant's account.
(3)
Under regulations which may be prescribed by the Administrator, a trust
may be treated as a qualified employee trust with respect to a small business concern if—
(A)
the trust is maintained by an employee organization which
represents at least 51 percent of the employees of such concern, and
(B)

such concern maintains a plan—

8

SMALL BUSINESS ACT

(i)
which is an employee benefit plan which is designed to
invest primarily in qualifying employer securities (as defined in section 4975(e)(8) of the
Internal Reve nue Code of 1954),
(ii)
which provides that each participant in the plan is entitled
to direct the plan as to the manner in which voting rights under qualifying employer securities
which are allocated to the account of such participant are to be exercised with respect to a
corporate matter which (by law or charter) must be decided by a majority vote of the outstanding
common shares voted,
(iii)
which provides that each participant who is entitled to
distribution from the plan has a right, in the case of qualifying employer securities which are not
readily tradable on an established market, to require that the concern repurchase such securities
under a fair valuation formula, and
(iv)
which meets such other requirements (similar to
requirements applicable to employee stock ownership plans as defined in section 4975(e)(7) of
the Internal Revenue Code of 1954) as the Administrator may prescribe, and
(C)
in the case of a loan guarantee under section 7(a), such
organization enters into an agreement with the Administration which is described in paragraph
(2)(B).
(d)
For purposes of section 7 of this Act, the term "qualified Indian tribe" means an
Indian tribe as defined in section 4(a) of the Indian Self- Determination and Education Assistance
Act, which owns and controls 100 per centum of a small business concern.
(e)
For purposes of section 7 of this Act, the term "public or private organization for
the handicapped" means one—
(1)
which is organized under the laws of the United States or of any State,
operated in the interest of handicapped individuals, the net income of which does not inure in
whole or in part to the benefit of any shareholder or other individual;
(2)
which complies with any applicable occupational health and safety
standard prescribed by the Secretary of Labor; and
(3)
which, in the production of commodities and in the provision of services
during any fiscal year in which it received financial assistance under this subsection, employs
handicapped individuals for not less than 75 per centum of the man-hours required for the
production or provision of the commodities or services.
(f)
individual—

For purposes of section 7 of this Act, the term “handicapped individual” means an

9

SMALL BUSINESS ACT

(1)
who has a physical, mental, or emotional impairment, defect, ailment,
disease, or disability of a permanent nature which in any way limits the selection of any type of
employment for which the person would otherwise be qualified or qualifiable; or
(2)
(g)

who is a service-disabled veteran.

For purposes of section 7 of this Act, the term "energy measures" includes—

(1)
solar thermal energy equipment which is either of the active type based
upon mechanically forced energy transfer or of the passive type based on convective, conductive,
or radiant energy transfer or some combination of these types;
(2)

photovoltaic cells and related equipment;

(3)
a product or service the primary purpose of which is conservation of
energy through devices or techniques which increase the energy efficiency of existing
equipment, methods of operation, or systems which use fossil fuels, and which is on the Energy
Conservation Measures list of the Secretary of Energy or which the Administrator determines to
be consistent with the intent of this subsection;
(4)
equipment the primary purpose of which is production of energy from
wood, biological waste, grain or other biomass source of energy;
(5)
equipment the primary purpose of which is industrial cogeneration of
energy, district heating, or production of energy from industrial waste;
(6)

hydroelectric power equipment;

(7)

wind energy conversion equipment; and

(8)
engineering, architectural, consulting, or other professional services which
are necessary or appropriate to aid citizens in using any of the measures described in paragraph
(1) through (7).
(h)
For purposes of this Act, the term "credit elsewhere" means the availability of
credit from non-Federal sources on reasonable terms and conditions taking into consideration the
prevailing rates and terms in the community in or near where the concern transacts business, or
the homeowner resides, for similar purposes and periods of time.
(i)
For purposes of section 7 of this Act, the term "homeowners" includes owners and
lessees of residential property and also includes personal property.
(j)
For the purposes of this Act, the term "small agricultural cooperative" means an
association (corporate or otherwise) acting pursuant to the provisions of the Agricultural
Marketing Act (12 U.S.C. 1141(j), whose size does not exceed the size standard established by
the Administration for other similar agricultural small business concerns. In determining such

10

SMALL BUSINESS ACT

size, the Administration shall regard the association as a business concern and shall not include
the income or employees of any member shareholder of such cooperative.
(k)
For the purposes of this Act, the term "disaster" means a sudden event which
causes severe damage including, but not limited to, floods, hurricanes, tornadoes, earthquakes,
fires, explosions, volcanoes, windstorms, landslides or mudslides, tidal waves, commercial
fishery failures or fishery resource disasters (as determined by the Secretary of Commerce under
section 308(b) of the Interjurisdictional Fisheries Act of 1986), ocean conditions resulting in the
closure of customary fishing waters, riots, civil disorders or other catastrophes, except it does not
include economic dislocations.
(l)

For purposes of this Act—
(1)

The term "computer crime" means—

(A)
the use of a computer; and

any crime committed against a small business concern by means of

(B)
any crime involving the illegal use of, or tampering with, a
computer owned or utilized by a small business concern.
(m)
For purposes of this Act, the term "simplified acquisition threshold" has the
meaning given such term in section 4(11) of the Office of Federal Procurement Policy Act (41
USC 403(11)).
(n)
For the purposes of this Act, a small business concern is a small business concern
owned and controlled by women if—
(1)
at least 51 percent of small business concern is owned by one or more
women or, in the case of any publicly owned business at least 51 percent of the stock of which is
owned by one or more women; and
(2)
the management and daily business operations of the business are
controlled by one or more women.
(o)
DEFINITIONS OF BUNDLING OF CONTRACT REQUIREMENTS AND
RELATED TERMS.—In this Act:
(1)
BUNDLED CONTRACT.—The term “bundled contract” means a
contract that is entered into to meet requirements that are consolidated in a bundling of contract
requirements.
(2)
BUNDLING OF CONTRACT REQUIREMENTS.—The term “bundling
of contract requirements” means consolidating 2 or more procurement requirements for goods or
services previously provided or performed under separate smaller contracts into a solicitation of

11

SMALL BUSINESS ACT

offers for a single contract that is likely to be unsuitable for award to a small-business concern
due to—
(A)
performance specified;

the diversity, size, or specialized nature of the elements of the

(B)

the aggregate dollar value of the anticipated award;

(C)

the geographical dispersion of the contract performance sites; or

(D)

any combination of the factors described in subparagraphs (A),

(B), and (C).
(3)
SEPARATE SMALL CONTRACT.—The term “separate smaller
contract”, with respect to a bundling of contract requirements, means a contract that has been
performed by 1 or more small business concerns or was suitable for award to 1 or more small
business concerns.
(p)

DEFINITIONS RELATING TO HUBZONES.—In this Act:

(1)
HISTORICALLY UNDERUTILIZED BUSINESS ZONE.—The term
“historically underutilized business zone” means any area located within 1 or more—

(2)

(A)

qualified census tracts;

(B)

qualified nonmetropolitan counties;

(C)

lands within the external boundaries of an Indian reservation;

(D)

redesignated areas; or

(E)

base closure areas.

HUBZONE.—The term “HUBZone” means a historically underutilized

business zone.
(3)
HUBZONE SMALL BUSINESS CONCERN.—The term “HUBZone
small business concern” means—
(A)
a small business concern that is at least 51 percent owned and
controlled by United States citizens;
(B)

a small business concern that is—

12

SMALL BUSINESS ACT

(i)
an Alaska Native Corporation owned and controlled by
Natives (as determined pursuant to section 29(e)(1) of the Alaska Native Claims Settlement Act
(43 U.S.C. 1626(e)(1))); or
(ii)
a direct or indirect subsidiary corporation, joint venture, or
partnership of an Alaska Native Corporation qualifying pursuant to section 29(e)(1) of the
Alaska Native Claims Settlement Act (43 U.S.C. 1626(e)(1)), if that subsidiary, joint venture, or
partnership is owned and controlled by Natives (as determined pursuant to section 29(e)(2) of the
Alaska Native Claims Settlement Act (43 U.S.C. 1626(e)(2)));
(C)

a small business concern—

(i)
that is wholly owned by 1 or more Indian tribal
governments, or by a corporation that is wholly owned by 1 or more Indian tribal governments;
or
(ii)
that is owned in part by 1 or more Indian tribal
governments, or by a corporation that is wholly owned by 1 or more Indian tribal governments, if
all other owners are either United States citizens or small business concerns;
(D)

a small business concern that is—

(i)
wholly owned by a community development corporation
that has received financial assistance under Part 1 of Subchapter A of the Community Economic
Development Act of 1981 (41 U.S.C. 9805 et seq.); or
(ii)
owned in part by 1 or more community development
corporations, if all other owners are either United States citizens or small business concerns; or
(E)

a small business concern that is—
(i)

a small agricultural cooperative organized or incorporated

in the United States;
(ii)
wholly owned by 1 or more small agricultural cooperatives
organized or incorporated in the United States; or
(iii)
owned in part by 1 or more small agricultural cooperatives
organized or incorporated in the United States, if all owners are small business concerns or
United States citizens.
(4)

QUALIFIED AREAS—

(A)
QUALIFIED CENSUS TRACT.—The term “qualified census
tract” has the meaning given that term in section 42(d)(5)(C)(ii) of the Internal Revenue Code of
1986.

13

SMALL BUSINESS ACT

(B)
QUALIFIED NONMETROPOLITAN COUNTY.—The term
“qualified nonmetropolitan county” means any county—
(i)
that was not located in a metropolitan statistical area (as
defined in section 143(k)(2)(B) of the Internal Revenue Code of 1986) at the time of the most
recent census taken for purposes of selecting qualified census tracts under section 42(d)(5)(C)(ii)
of the Internal Revenue Code of 1986; and
(ii)

in which—

(I)
the median household income is less than 80
percent of the nonmetropolitan State median household income, based on the most recent data
available from the Bureau of the Census of the Department of Commerce; or
(II)
the unemployment rate is not less than 140 percent
of the average unemployment rate for the United States or for the State in which such county is
located, whichever is less, based on the most recent data available from the Secretary of Labor.
(C)
REDESIGNATED AREA.—The term “redesignated area” means
any census tract that ceases to be qualified under subparagraph (A) and any nonmetropolitan
county that ceases to be qualified under subparagraph (B), except that a census tract or a
nonmetropolitan county may be a “redesignated area” only until the later of—
(i)
the date on which the Census Bureau publicly releases the
first results from the 2010 decennial census; or
(ii)
3 years after the date on which the census tract or
nonmetropolitan county ceased to be so qualified.
(D)
BASE CLOSURE AREA.—The term “base closure area” means
lands within the external boundaries of a military installation that were closed through a
privatization process under the authority of—
(i)
the Defense Base Closure and Realignment Act of 1990
(part A of title XXIX of division B of Public Law 101-510; 10 U.S.C. 2687 note);
(ii)
title II of the Defense Authorization Amendments and Base
Closure and Realignment Act (Public Law 100-526; 10 U.S.C. 2687 note);
(iii)

section 2687 of title 10, United States Code; or

(iv)
any other provision of law authorizing or directing the
Secretary of Defense or the Secretary of a military department to dispose of real property at the
military installation for purposes relating to base closures of [sic] redevelopment, while retaining
the authority to enter into a leaseback of all or a portion of the property for military use.

14

SMALL BUSINESS ACT

(5)

QUALIFIED HUBZONE SMALL BUSINESS CONCERN—
(A)

IN GENERAL.—A HUBZone small business concern is

“qualified”, if—
(i)
the small business concern has certified in writing to the
Administrator (or the Administrator otherwise determines, based on information submitted to the
Administrator by the small business concern, or based on certification procedures, which shall be
established by the Administration by regulation) that—
(I)

it is a HUBZone small business concern—

(aa) pursuant to subparagraph (A), (B), (C), (D)
or (E) of paragraph (3), and that its principal office is located in a HUBZone and not fewer than
35 percent of its employees reside in a HUBZone; or
(bb) pursuant to paragraph (3)(C), and not fewer
than 35 percent of its employees engaged in performing a contract awarded to the small business
concern on the basis of a preference provided under section 31(b) reside within any Indian
reservation governed by 1 or more of the tribal government owners, or reside within any
HUBZone adjoining any such Indian reservation;
(II)
the small business concern will attempt to maintain
the applicable employment percentage under subclause (I) during the performance of any
contract awarded to the small business concern on the basis of a preference provided under
section 31(b); and
(III) with respect to any subcontract entered into by the
small business concern pursuant to a contract awarded to the small business concern under
section 31, the small business concern will ensure that—
(aa) in the case of a contract for services (except
construction), not less than 50 percent of the cost of contract performance incurred for personnel
will be expended for its employees or for employees of other HUBZone small bus iness concerns;
(bb) in the case of a contract for procurement of
supplies (other than procurement from a regular dealer in such supplies), not less than 50 percent
of the cost of manufacturing the supplies (not including the cost of materials) will be incurred in
connection with the performance of the contract in a HUBZone by 1 or more HUBZone small
business concerns;
(cc) in the case of a contract for the procurement
by the Secretary of Agriculture of agricultural commodities, none of the commodity being
procured will be obtained by the prime contractor through a subcontractor for the purchase of the
commodity in substantially the final form in which it is to be supplied to the Government; and

15

SMALL BUSINESS ACT

(ii)
no certification made or information provided by the small
business concern under clause (i) has been, in accordance with the procedures established under
section 31(c)(1)—
(I)

successfully challenged by an interested party; or

(II)

otherwise determined by the Administrator to be

materially false.
(B)
CHANGE IN PERCENTAGES.—The Administrator may utilize a
percentage other than the percentage specified in under [sic] item (aa) or (bb) of subparagraph
(A)(i)(III), if the Administrator determines that such action is necessary to reflect conventional
industry practices among small business concerns that are below the numerical size standard for
businesses in that industry category.
(C)
CONSTRUCTION AND OTHER CONTRACTS.—The
Administrator shall promulgate final regulations imposing requirements that are similar to those
specified in items (aa) and (bb) of subparagraph (A)(i)(III) on contracts for general and specialty
construction, and on contracts for any other industry category that would not otherwise be
subject to those requirements. The percentage applicable to any such requirement shall be
determined in accordance with subparagraph (B).
(D)
LIST OF QUALIFIED SMALL BUSINESS CONCERNS.—The
Administrator shall establish and maintain a list of qualified HUBZone small business concerns,
which list shall, to the extent practicable—
(i)
once the Administrator has made the certification required
by subparagraph (A)(i) regarding a qualified HUBZone small business concern and has
determined that subparagraph (A)(ii) does not apply to that concern, include the name, address,
and type of business with respect to each such small business concern;
(ii)

be updated by the Administrator not less than annually; and

(iii)

be provided upon request to any Federal agency or other

entity.
(6)

NATIVE AMERICAN SMALL BUSINESS CONCERNS.—

(A)
ALASKA NATIVE CORPORATION.—The term “Alaska Native
Corporation” has the same meaning as the term “Native Corporation” in section 3 of the Alaska
Native Claims Settlement Act (43 U.S.C. 1602).
(B)
ALASKA NATIVE VILLAGE.—The term “Alaska Native
Village” has the same meaning as the term “Native village” in section 3 of the Alaska Native
Claims Settlement Act (43 U.S.C. 1602).

16

SMALL BUSINESS ACT

(C)

INDIAN RESERVATION.—The term “Indian reservation”—

(i)
has the same meaning as the term “Indian country” in
section 1151 of title 18, United States Code, except that such term does not include—
(I)
any lands that are located within a State in which a
tribe did not exercise governmental jurisdiction on the date of enactment of this paragraph,
unless that tribe is recognized after that date of enactment by either an Act of Congress or
pursuant to regulations of the Secretary of the Interior for the administrative recognition that an
Indian group exists as an Indian tribe (part 83 of title 25, Code of Federal Regulations); and
(II)
lands taken into trust or acquired by an Indian tribe
after the date of enactment of this paragraph if such lands are not located within the external
boundaries of an Indian reservation or former reservation or are not contiguous to the lands held
in trust or restricted status on that date of enactment; and
(ii)

in the State of Oklahoma, means lands that—

(I)
are within the jurisdictional areas of an Oklahoma
Indian tribe (as determined by the Secretary of the Interior); and
(II)
are recognized by the Secretary of the Interior as
eligible for trust land status under part 151 of title 25, Code of Federal Regulations (as in effect
on the date of enactment of this paragraph).
(7)
AGRICULTURAL COMMODITY.—The term “agricultural commodity”
has the same meaning as in section 102 of the Agricultural Trade Act of 1978 (7 U.S.C. 5602).
(q)
DEFINITIONS RELATING TO VETERANS.—In this Act, the following
definitions apply:
(1)
SERVICE-DISABLED VETERAN.—The term “service-disabled
veteran” means a veteran with a disability that is service-connected (as defined in section
101(16) of title 38, United States Code).
(2)
SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY
SERVIC E-DISABLED VETERANS.—The term “small business concern owned and controlled
by service-disabled veterans” means a small business concern—
(A)
not less than 51 percent of which is owned by one or more servicedisabled veterans or, in the case of any publicly owned business, not less than 51 percent of the
stock of which is owned by one or more service-disabled veterans; and

17

SMALL BUSINESS ACT

(B)
the management and daily business operations of which are
controlled by one or more service-disabled veterans or, in the case of a veteran with permanent
and severe disability, the spouse or permanent caregiver of such veteran.
(3)
SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY
VETERANS.—The term “small business concern owned and controlled by veterans” means a
small business concern—
(A)
not less than 51 percent of which is owned by one or more veterans
or, in the case of any publicly owned business, not less than 51 percent of the stock of which is
owned by one or more veterans; and
(B)
the management and daily business operations of which are
controlled by one or more veterans.
(4)
VETERAN.—The term “veteran” has the meaning given the term in
section 101(2) of title 38, United States Code.
(r)
DEFINITIONS RELATING TO SMALL BUSINESS LENDING
COMPANIES.—As used in section 23 of this Act:
(1)
SMALL BUSINESS LENDING COMPANY.—The term “small business
lending company” means a business concern that is authorized by the Administrator to make
loans pursuant to section 7(a) and whose lending activities are not subject to regulation by any
Federal or State regulatory agency.
(2)
NON-FEDERALLY REGULATED SBA LENDER.—The term “nonFederally regulated SBA lender” means a business concern if—
(A)

such concern is authorized by the Administrator to make loans

(B)

such concern is subject to regulation by a State; and

under section 7;

(C)
Federal banking authority.

the lending activities of such concern are not regulated by any

§ 4.
(a)
In order to carry out the policies of this Act there is hereby created an agenc y
under the name "Small Business Administration" (herein referred to as the Administration),
which Administration shall be under the general direction and supervision of the President and
shall not be affiliated with or be within any other agency or department of the Federal
Government. The principal office of the Administration shall be located in the District of
Columbia. The Administration may establish such branch and regional offices in other places in
the United States as may be determined by the Administrator of the Administration. As used in
this Act, the term "United States" includes the several States, the Territories and possessions of

18

SMALL BUSINESS ACT

the United States, the Commonwealth of Puerto Rico, the Trust Territory of the Pacific Islands,
and the District of Columbia.
(b)
(1)
The management of the Administration shall be vested in an Administrator
who shall be appointed from civilian life by the President, by and with the advice and consent of
the Senate, and who shall be a person of outstanding qualifications known to be familiar and
sympathetic with small-business needs and problems. The Administrator shall not engage in any
other business, vocation, or employment than that of serving as Administrator. In carrying out
the programs administered by the Small Business Administration including its lending and
guaranteeing functions, the Administrator shall not discriminate on the basis of sex or marital
status against any person or small business concern applying for or receiving assistance from the
Small Business Administration, and the Small Business Administration shall give special
consideration to veterans of the Armed Forces of the United States and their survivors or
dependents. The President also may appoint a Deputy Administrator, by and with the advice and
consent of the Senate. The Administrator is authorized to appoint five Associate Administrators
(including the Associate Administrator specified in section 201 of the Small Business Investment
Act of 1958) to assist in the execution of the functions vested in the Administration. One of the
Associate Administrators shall be designated at the time of his appointment as the Associate
Administrator for Minority Small Business and Capital Ownership Development who shall be an
employee in the competitive service or in the Senior Executive Service and a career appointee
and shall be responsible to the Administrator for the formulation and execution of the policies
and programs under sections 7(j) and 8(a) of this Act which provide assistance to minority small
business concerns. The Deputy Administrator shall be Acting Administrator of the
Administration during the absence or disability of the Administrator or in the event of a vacancy
in the office of the Administrator.
(2)

The Administrator also shall be responsible for—

(A)
establishing and maintaining an external small business economic
data base for the purpose of providing the Congress and the Administration information on the
economic condition and the expansion or contraction of the small business sector. To that end,
the Administrator shall publish on a regular basis national small business economic indices and,
to the extent feasible, regional small business economic indices, which shall include, but need
not be limited to, data on—
(i)

employment, layoffs, and new hires;

(ii)
number of business establishments and the types of such
establishments such as sole proprietorships, corporations, and partnerships;
(iii)

number of business formations and failures;

(iv)

sales and new orders;

(v)

back orders;

19

SMALL BUSINESS ACT

(vi)

investment in plant and equipment;

(vii)

changes in inventory and rate of inventory turnover;

(viii) sources and amounts of capital investment, including debt,
equity, and internally generated funds;
(ix)

debt to equity ratios;

(x)

exports;

(xi)
number and dollar amount of mergers and acquisitions by
size of acquiring and acquired firm; and
(xii)

concentration ratios; and

(B)
publishing annually a report giving a comparative analysis and
interpretation of the historical trends of the small business sector as reflected by the data
acquired pursuant to subparagraph (A) of this subsection.
(3)

RISK MANAGEMENT DATABASE.—

(A)
ESTABLISHMENT.—The Administration shall establish, within
the management system for the loan programs authorized by subsections (a) and (b) of section 7
of this Act and title V of the Small Business Investment Act of 1958, a management information
system that will generate a database capable of providing timely and accurate information in
order to identify loan underwriting, collections, recovery, and liquidation problems.
(B)
INFORMATION TO BE MAINTAINED.—In addition to such
other information as the Administration considers appropriate, the database established under
subparagraph (A) shall, with respect to each loan program described in subparagraph (A),
include information relating to—
(i)

the identity of the institution making the guaranteed loan or

(ii)

the identity of the borrower;

(iii)

the total dollar amount of the loan or debenture;

(iv)

the total dollar amount of government exposure in each

(v)

the district of the Administration in which the borrower has

issuing the debenture;

loan;

its principal office;

20

SMALL BUSINESS ACT

(vi)
the principal line of business of the borrower, as identified
by Standard Industrial Classification Code (or any successor to that system);
(vii)

the delinquency rate for each program (including number of

(viii)

the number and amount of repurchases, losses, and

instances and days overdue);

recoveries in each program;
(ix)
the number of deferrals or forbearances in each program
(including days and number of instances);
(x)
comparisons on the basis of loan program, lender,
Administration district and region, for all the data elements maintained; and
(xi)
underwriting characteristics of each loan that has entered
into default, including term, amount and type of collateral, loan-to-value and other actual and
projected ratios, line of business, credit history, and type of loan.
(C)
DEADLINE FOR OPERATIONAL CAPABILITY.—The
database established under subparagraph (A) shall—
(i)

be operational not later than June 30, 1997; and

(ii)
capture data beginning on the first day of the second
quarter of fiscal year 1997 beginning after such date and thereafter.
(4)
(A)
The Administrator shall establish a small business computer
security and education program to—
(i)

provide small business concerns information regarding—
(I)

utilization and management of computer

(II)

computer crimes committed against small business

(III)

security for computers owned or utilized by small

technology;

concerns; and

business concerns;
(ii)
provide for periodic forums for small business concerns to
improve their knowledge of the matters described in clause (i); and
(iii)
provide training opportunities to educate small business
users on computer security techniques.

21

SMALL BUSINESS ACT

(B)
The Administrator, after consultation with the director of the
Institute of Computer Sciences and Technology within the Department of Commerce, shall
develop information and materials to carry out the activities described in subparagraph (A) of
this paragraph.
(c)
(1)
There are hereby established in the Treasury the following revolving
funds: (A) a disaster loan fund which shall be available for financing functions performed under
sections 5(e), 7(b)(1), 7(b)(2), 7(b)(3), 7(b)(4), and 7(c)(2) of this Act; and (B) a business loan
and investment fund which shall be available for financing functions performed under sections
5(g), 7(a), and 8(a) of this Act, and titles III, IV and V of the Small Business Investment Act of
1958.
(2)
All repayments of loans and debentures, payments of interest and other
receipts arising out of transactions heretofore or hereafter entered into by the Administration (A)
pursuant to sections 5(e), 7(b)(1), 7(b)(2), 7(b)(3), 7(b)(4), 7(b)(5), 7(b)(6), 7(b)(7), 7(b)(8),
7(c)(2), and 7(g) of this Act shall be paid into a disaster loan fund; and (B) pursuant to sections
5(g), 7(a), 7(e), 7(h), 7(i), 7(l), 7(m), and 8(a) of this Act, and titles III, IV and V of the Small
Business Investment Act of 1958, shall be paid into the business loan and investment fund.
(3)
Unexpended balances of appropriations made to the fund pursuant to this
subsection, as in effect immediately prior to the effective date of this paragraph, shall be
allocated, together with related assets and liabilities, to the funds established by paragraph (1) in
such amounts as the Administrator shall determine.
(4)
The Administration shall submit to the Committees on Appropriations,
Senate Select Committee on Small Business, and the Committee on Small Business of the House
of Representatives, as soon as possible after the beginning of each calendar quarter, a full and
complete report on the status of each of the funds established by paragraph (1). Business-type
budgets for each of the funds established by paragraph (1) shall be prepared, transmitted to the
Committees on Appropriations, the Senate Select Committee on Small Business and the
Committee on Small Business of the House of Representatives and considered, and enacted in
the manner prescribed by law (Sections 102, 103 and 104 of the Government Corporation
Control Act (31 USC 847-849)) for wholly owned Government corporations.
(5)
(A)
The Administration is authorized to make and issue notes to the
Secretary of the Treasury for the purpose of obtaining funds necessary for discharging
obligations under the revolving funds created by section 4(c)(1) of this Act and for authorized
expenditures out of the funds. Such notes shall be in such form and denominations and have
such maturities and be subject to such terms and conditions as may be prescribed by the
Administration with the approval of the Secretary of the Treasury. Such notes shall bear interest
at a rate fixed by the Secretary of the Treasury, taking into consideration the current average
market yield of outstanding marketable obligations of the United States having maturities
comparable to the notes issued by the Administration under this paragraph. The Secretary of the
Treasury is authorized and directed to purchase any notes of the Administration issued
hereunder, and, for that purpose, the Secretary of the Treasury is authorized to use as a public

22

SMALL BUSINESS ACT

debt transaction the proceeds from the sale of any securities issued under the Second Liberty
Bond Act, as amended, and the purposes for which such securities may be issued under such Act,
as amended, are extended to include the purchase of notes issued by the Administration. All
redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated
as public debt transactions of the United States. All borrowing authority contained herein shall
be effective only to such extent or in such amounts as are provided in advance in appropriation
Acts.
(B)
(i)
Moneys in the funds established in subsection (c)(1) not
needed for current operations may be paid into miscellaneous receipts of the Treasury.
(ii)
Following the close of each fiscal year, the Administration
shall pay into the miscellaneous receipts of the United States Treasury the actual interest that the
Administration collects during that fiscal year on all financings made under this Act.
(C)
Except on those loan disbursements on which interest is paid under
subsection (B)(ii), the Administration shall pay into miscellaneous receipts of the Treasury,
following the close of each fiscal year, interest received by the Administration on financing
functions performed under this Act and titles III and V of the Small Business Investment Act of
l958 providing the capital used to perform such functions originated from appropriated funds.
Such payments shall be treated by the Department of the Treasury as interest income, not as
retirement of indebtedness.
(D)
There are authorized to be appropriated, in any fiscal year, such
sums as may be necessary for losses and interest subsidies incurred by the funds established by
subsection (c)(l), but not previously reimbursed.
(d)
There is hereby created the Loan Policy Board of the Small Business
Administration, which shall consist of the following members, all ex officio. The Administrator,
as Chairman, the Secretary of the Treasury, and the Secretary of Commerce. Either of the said
Secretaries may designate an officer of his Department, who has been appointed by the President
by and with the advice and consent of the Senate, to act in his stead as a member of the Loan
Policy Board with respect to any matter or matters. The Loan Policy Board shall establish
general policies (particularly with reference to the public interest involved in the granting and
denial of applications for financial assistance by the Administration and with reference to the
coordination of the functions of the Administration with other activities and policies of the
Government), which shall govern the granting and denial of applications for financial assistance
by the Administration.
(e)
PROHIBITION ON THE PROVISION OF ASSISTANCE.—Notwithstanding
any other provision of law, the Administration is prohibited from providing any financial or
other assistance to any business concern or other person engaged in the production or distribution
of any product or service that has been determined to be obscene by a court of competent
jurisdiction.

23

SMALL BUSINESS ACT

(f)
CERTIFICATION OF COMPLIANCE WITH CHILD SUPPORT
OBLIGATIONS.—
(1)
IN GENERAL.—For financial assistance approved after the promulgation
of final regulations to implement this section, each recipient of financial assistance under this
Act, including a recipient of a direct loan or a loan guarantee, shall certify that the recipient is not
more than 60 days delinquent under the terms of any—
(A)

administrative order;

(B)

court order; or

(C)
repayment agreement entered into between the recipient and the
custodial parent or State agency providing child support enforcement services,
that requires the recipient to pay child support, as such term is defined in section 462(b) of the
Social Security Act.
(2)
ENFORCEMENT.—Not later than 6 months after the date of enactment
of this subsection, the Administration shall promulgate such regulations as may be necessary to
enforce compliance with the requirements of this subsection.
(g)

GIFTS.—

(1)
IN GENERAL.—The Administrator may, for purposes of this Act, the
Small Business Investment Act of 1954 [sic; should be 1958], and title IV of the Women’s Business
Ownership Act of 1988, solicit, accept, hold, administer, utilize, and dispose of gifts, devises,
and bequests of cash, property (including tangible, intangible, real, and personal), subsistence,
and services. Notwithstanding any other provision of law, the Administrator may utilize gifts,
devises, or bequests for marketing and outreach activities, including the cost of promotional
materials and wearing apparel.
(2)
AUDITS.—Any gift, devise, or bequest of cash accepted by the
Administrator shall be held in a separate account and shall be subject to semi-annual audits by
the Inspector General of the Administration who shall report his findings to the Congress.
(3)
CONFLICTS OF INTEREST.—No gift, devise, or bequest shall be
solicited or accepted under the authority of this subsection if such solicitation or acceptance
would, in the determination of the General Counsel, create a conflict of interest.
(4)
ACCEPTANCE OF SERVICES AND FACILITIES FOR DISASTER
LOAN PROGRAM.—The Administrator may accept the services and facilities of Federal, State,
and local agencies and groups, both public and private, and utilize such gratuitous services and
facilities as may, from time to time, be necessary, to further the objectives of section 7(b).
(h)

CO-SPONSORSHIP OF EVENTS.—

24

SMALL BUSINESS ACT

(1)
AUTHORIZATION.—The Administrator, after consultation with the
General Counsel, may provide assistance for the benefit of small business through
Administration-sponsored activities, through cosponsored activities with any eligible entity, or
through such other activities that the Administrator determines to be appropriate, including
recognition events.
(2)
ELIGIBLE ENTITY.—For purposes of this subsection, the term “eligible
entity” means any for-profit or not- for-profit entity, any Federal, State, or local government
official, or any Federal, State, or lo cal government entity.
(3)
PROHIBITION ON ENDORSEMENTS.—The Administrator shall ensure
that the Administration and any eligible entities that cosponsor activities receive appropriate
recognition for such cosponsorship, and that such recognition does not constitute or imply an
endorsement by the Administration of any product or service of such entity.
(4)
AUTHORITY TO CHARGE FEES.—Notwithstanding any other
provision of law, the Administrator may charge a participant in any activity sponsored or
cosponsored by the Administration a minimal fee, and retain and use such fee to cover the costs
of such activity.
(5)
LIMITED DELEGATION.—The Administrator may not delegate the
authority described in this subsection except to the Deputy Administrator, an Associate
Administrator, or an Assistant Administrator.
(6)
REPORT TO CONGRESS.—The Inspector General of the Administration
shall report semi-annually to Congress on the Administrator’s use of authority under this
subsection.
(7)
RULEMAKING.—Not later tha n 180 days after the date of enactment of
this subsection, the Administrator shall promulgate regulations to carry out the provisions of this
subsection.
§5
(a)
The Administration shall have power to adopt, alter, and use a seal, which shall be
judicially noticed. The Administrator is authorized, subject to the civil service and classification
laws, to select, employ, appoint, and fix the compensation of such officers, employees, attorneys,
and agents as shall be necessary to carry out the provisions of this Act; to define their authority
and duties; and to pay the costs of qualification of certain of them as notaries public. The
Administration, with the consent of any board, commission, independent establishment or
executive department of the Government, may avail itself on a reimbursable or non-reimbursable
basis of the use of information, services, facilities (including any field service thereof), officers,
and employees thereof, in carrying out the provisions of this Act.
(b)
In the performance of, and with respect to, the functions, powers, and duties
vested in him by this Act the Administrator may—

25

SMALL BUSINESS ACT

(1)
sue and be sued in any court of record of a State having general
jurisdiction, or in any United States district court, and jurisdiction is conferred upon such district
court to determine such controversies without regard to the amount in controversy; but no
attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued
against the Administrator or his property;
(2)
under regulations prescribed by him, assign or sell at public or private
sale, or otherwise dispose of for cash or credit, in his discretion and upon such terms and
conditions and for such consideration as the Administrator shall determine to be reasonable, any
evidence of debt, contract, claim, personal property, or security assigned to or held by him in
connection with the payment of loans granted under this Act, and to collect or compromise all
obligations assigned to or held by him and all legal or equitable rights accruing to him in
connection with the payment of such loans until such time as such obligations may be referred to
the Attorney General for suit or collection;
(3)
deal with, complete, renovate, improve, modernize, insure, or rent, or sell
for cash or credit upon such terms and conditions and for such consideration as the Administrator
shall determine to be reasonable, any real property conveyed to or otherwise acquired by him in
connection with the payment of loans granted under this Act;
(4)
pursue to final collection, by way of compromise or otherwise, all claims
against third parties assigned to the Administrator in connection with loans made by him. This
shall include authority to obtain deficiency judgments or otherwise in the case of mortgages
assigned to the Administrator. Section 3709 of the Revised Statutes, as amended (41 U.S.C., sec.
5), shall not be construed to apply to any contract of hazard insurance or to any purchase or
contract for services or supplies on account of property obtained by the Administrator as a result
of loans made under this Act if the premium therefor or the amount thereof does not exceed
$1,000. The power to convey and to execute in the name of the Administrator deeds of
conveyance, deeds of release, assignments and satisfactions of mortgages, and any other written
instrument relating to real property or any interest therein acquired by the Administrator pursuant
to the provisions of this Act may be exercised by the Administrator or by any officer or agent
appointed by him without the execution of any express delegation of power or power of attorney.
Nothing in this section shall be construed to prevent the Administrator from delegating such
power by order or by power of attorney, in his discretion, to any officer or agent he may appoint;
(5)
acquire, in any lawful manner, any property (real, personal, or mixed,
tangible or intangible), whenever deemed necessary or appropriate to the conduct of the activities
authorized in sections 7(a) and 7(b);
(6)
make such rules and regulations as he deems necessary to carry out the
authority vested in him by or pursuant to this Act;
(7)
in addition to any powers, functions, privileges and immunities otherwise
vested in him, take any and all actions (including the procurement of the services of attorneys by
contract in any office where an attorney or attorneys are not or cannot be economically employed
full time to render such services) when he determines such actions are necessary or desirable in

26

SMALL BUSINESS ACT

making, servicing, compromising, modifying, liquidating, or otherwise dealing with or realizing
on loans made under the provisions of this Act: Provided, That with respect to deferred
participation loans, the Administrator may, in the discretion of and pursuant to regulations
promulgated by the Administrator, authorize participating lending institutions to take actions
relating to loan servicing on behalf of the Administrator, including determining eligibility and
creditworthiness and loan monitoring, collection, and liquidation;
(8)
pay the transportation expenses and per diem in lieu of subsistence
expenses, in accordance with the Travel Expense Act of 1949, for travel of any person employed
by the Administration to render temporary services not in excess of six months in connection
with any disaster referred to in section 7(b) from place of appointment to, and while at, the
disaster area and any other temporary posts of duty and return upon completion of the
assignment: Provided That the Administrator may extend the six- month limitation for an
additional six months if the Administrator determines the extension is necessary to continue
efficient disaster loan making activities;
(9)
accept the services and facilities of Federal, State, and local agencies and
groups, both public and private, and utilize such gratuitous services and facilities as may, from
time to time, be necessary, to further the objectives of section 7(b);
(10) upon purchase by the Administration of any deferred participation entered
into under section 7 of this Act, continue to charge a rate of interest not to exceed that initially
charged by the participating institution on the amount so purchased for the remaining term of the
indebtedness;
(11) make such investigations as he deems necessary to determine whether a
recipient of or participant in any assistance under this Act or any other person has engaged or is
about to engage in any acts or practices which constitute or will constitute a violation of any
provision of this Act, or of any rule or regulation under this Act, or of any order issued under this
Act. The Administration shall permit any person to file with it a statement in writing, under oath
or otherwise as the Administration shall determine, as to all the facts and circumstances
concerning the matter to be investigated. For the purpose of any investigation, the
Administration is empowered to administer oaths and affirmations, subpena [sic] witnesses,
compel their attendance, take evidence, and require the production of any books, papers, and
documents which are relevant to the inquiry. Such attendance of witnesses and the production of
any such records may be required from any place in the United States. In case of contumacy by,
or refusal to obey a subpena [sic] issued to, any person, including a recipient or participant, the
Administration may invoke the aid of any court of the United States within the jurisdiction of
which such investigation or proceeding is carried on, or where such person resides or carries on
business, in requiring the attendance and testimony of witnesses and the production of books,
papers, and documents; and such court may issue an order requiring such person to appear before
the Administration, there to produce records, if so ordered, or to give testimony touching the
matter under investigation. Any failure to obey such order of the court may be punished by such
court as a contempt thereof. All process in any such case may be served in the judicial district
whereof such person is an inhabitant or wherever he may be found; and

27

SMALL BUSINESS ACT

(12) impose, retain, and use only those fees which are specifically authorized
by law or which are in effect on September 30, 1994, and in the amounts and at the rates in effect
on such date, except that the Administrator may, subject to approval in appropriations Acts,
impose, retain, and utilize, additional fees—
(A)
not to exceed $100 for each loan servicing action (other than a loan
assumption) requested after disbursement of the loan, including any substitution of collateral,
release or substitution of a guarantor, reamortization, or similar action;
(B)

not to exceed $300 for loan assumptions;

(C)
not to exceed 1 percent of the amount of requested financings
under title III of the Small Business Investment Act of 1958 for which the applicant requests a
commitment from the Administration for funding during the following year; and
(D)
to recover the direct, incremental cost involved in the production
and dissemination of compilations of information produced by the Administration under the
authority of this Act and the Small Business Investment Act of 1958;
(13) collect, retain and utilize, subject to approval in appropriations Acts, any
amounts collected by fiscal transfer agents and not used by such agent as payment of the cost of
loan pooling or debenture servicing operations, except that amounts collected under this
paragraph and paragraph (12) shall be utilized solely to facilitate the administration of the
program that generated the excess amounts; and
(14) require any lender authorized to make loans under section 7 of this Act to
pay examination and review fees, which shall be deposited in the account for salaries and
expenses of the Administration, and shall be available for the costs of examinations, reviews, and
other lender oversight activities.
(c)
To such extent as he finds necessary to carry out the provisions of this Act, the
Administrator is authorized to procure the temporary (not in excess of one year) or intermittent
services of experts or consultants or organizations thereof, including stenographic reporting
services, by contract or appointment, and in such cases such services shall be without regard to
the civil- service and classification laws and, except in the case of stenographic reporting services
by organizations, without regard to section 3709 of the Revised Statutes, as amended (41 U.S.C.,
§ 5). Any individual so employed may be compensated at a rate not in excess of the daily
equivalent of the highest rate payable under section 5332 of title 5, United States Code, including
traveltime, and, while such individual is away from his or her home or regular place of business,
he or she may be allowed travel expenses (including per diem in lieu of subsistence) as
authorized by section 5703 of title 5, United States Code.
(d)
Section 3648 of the Revised Statutes (31 U.S.C. 529) shall not apply to
prepayments of rentals made by the Administration on safety deposit boxes used by the
Administration for the safeguarding of instruments held as security for loans or for the
safeguarding of other documents.

28

SMALL BUSINESS ACT

(e)
(1)
Subject to the requirements and conditions contained in this subsection,
upon application by a small business concern which is the recipient of a loan made under this
Act, the Ad ministration may undertake the small business concern's obligation to make the
required payments under such loan or may suspend such obligation if the loan was a direct loan
made by the Administration. While such payments are being made by the Administration
pursuant to the undertaking of such obligation or while such obligation is suspended, no such
payment with respect to the loan may be required from the small business concern.
(2)
The Administration may undertake or suspend for a period of not to
exceed 5 years any small business concern's obligation under this subsection only if—
(A)
without such undertaking or suspension of the obligation, the small
business concern would, in the sole discretion of the Administration, become insolvent or remain
insolvent;
(B)
with the undertaking or suspension of the obligation, the small
business concern would, in the sole discretion of the Administration, become or remain a viable
small business entity; and
(C)
the small business concern executes an agreement in writing
satisfactory to the Administration as provided by paragraph (4).
(3)
Notwithstanding the provisions of sections 7(a)(4)(C) and 7(i)(l) of this
Act, the Administration may extend the maturity of any loan on which the Administration
undertakes or suspends the obligation pursuant to this subsection for a corresponding period of
time.
(4)
(A)
Prior to the undertaking or suspension by the Administration of
any small business concern's obligation under this subsection, the Administration, consistent
with the purposes sought to be achieved herein, shall require the small business concern to agree
in writing to repay to it the aggregate amount of the payments which were required under the
loan during the period for which such obligation was undertaken or suspended, either—
(i)
by periodic payments not less in amount or less frequently
falling due than those which were due under the loan during such period, or
(ii)
pursuant to a repayment schedule agreed upon by the
Administration and the small business concern, or
(iii)

by a combination of the payments described in clause (i)

and clause (ii).
(B)
In addition to requiring the small business concern to execute the
agreement described in subparagraph (A), the Administration sha ll, prior to the undertaking or
suspension of the obligation, take such action, and require the small business concern to take

29

SMALL BUSINESS ACT

such action as the Administration deems appropriate in the circumstances, including the
provision of such security as the Administration deems necessary or appropriate to insure that the
rights and interests of the lender (Small Business Administration or participant) will be
safeguarded adequately during or after the period in which such obligation is so undertaken or
suspended.
(5)
The term "required payments" with respect to any loan means payments of
principal and interest under the loan.
(f)
(1)
The guaranteed portion of any loan made pursuant this Act may be sold by
the lender, and by any subsequent holder, consistent with regulations on such sales as the
Administration shall establish, subject to the following limitations:
(A)
prior to the Administration's approval of the sale, or upon any
subsequent resale, of any loan guaranteed by the Administration, if the lender certifies that such
loan has been properly closed and that the lender has substantially complied with the provisions
of the guarantee agreement and the regulations of the Administration, the Administration shall
review and approve only materials not previously approved;
(B)
all fees due the Administration on a guaranteed loan shall have
been paid in full prior to any sale; and
(C)
each loan, except each loan made under section 7(a)(14), shall
have been fully disbursed to the borrower prior to any sale.
(2)
After a loan is sold in the secondary market, the lender shall remain
obligated under its guarantee agreement with the Administration, and shall continue to service
the loan in a manner consistent with the terms and conditions of such agreement.
(3)
The Administration shall develop such procedures as are necessary for the
facilitation, administration, and promotion of secondary market operations, and for assessing the
increase of small business access to capital at reasonable rates and terms as a result of secondary
market operations. Beginning on March 31, 1997, the sale of the unguaranteed portion of any
loan made under section 7(a) shall not be permitted until a final regulation that applies uniformly
to both depository institutions and othe r lenders is promulgated by the Administration setting
forth the terms and conditions under which such sales can be permitted, including maintenance
of appropriate reserve requirements and other safeguards to protect the safety and soundness of
the program.
(4)
Nothing in this subsection or subsection (g) of this section shall be
interpreted to impede or extinguish the right of the borrower or the successor in interest to such
borrower to prepay (in whole or in part) any loan made pursuant to section 7(a) of this Act, the
guaranteed portion of which may be included in such trust or pool, or to impede or extinguish the
rights of any party pursuant to section 7(a)(6)(C) or subsection (e) of this section.

30

SMALL BUSINESS ACT

(g)
(1)
The Administration is authorized to issue trust certificates representing
ownership of all or a fractional part of the guaranteed portion of one or more loans which have
been guaranteed by the Administration under this Act, or under section 502 of the Small
Business Investment Act of 1958 (15 U.S.C. 660): Provided, That such trust certificates shall be
based on and backed by a trust or pool approved by the Administration and composed solely of
the entire guaranteed portion of such loans.
(2)
The Administration is authorized, upon such terms and conditions as are
deemed appropriate, to guarantee the timely payment of the principal of and interest on trust
certificates issued by the Administration or its agent for purposes of this subsection. Such
guarantee shall be limited to the extent of principal and interest on the guaranteed portions of
loans which compose the trust or pool. In the event that a loan in such trust or pool is prepaid,
either voluntarily or in the event of default, the guarantee of timely payment of principal and
interest on the trust certificates shall be reduced in proportion to the amount of principal and
interest such prepaid loan represents in the trust or pool. Interest on prepaid or defaulted loans
shall accrue and be guaranteed by the Administration only through the date of payment on the
guarantee. During the term of the trust certificate, it may be called for redemption due to
prepayment or default of all loans constituting the pool.
(3)
The full faith and credit of the United States is pledged to the payment of
all amounts which may be required to be paid under any guarantee of such trust certificates
issued by the Administration or its agent pursuant to this subsection.
(4)
(A)
The Administration may collect a fee for any loan guarantee sold
into the secondary market under subsection (f) in an amount equal to not more than 50 percent of
the portion of the sale price that exceeds 110 percent of the outstanding principal amount of the
portion of the loan guaranteed by the Administration. Any such fee imposed by the
Administration shall be collected by the Administration or by the agent which carries out on
behalf of the Administration the central registration functions required by subsection (h) of this
section and shall be paid to the Administration and used solely to reduce the subsidy on loans
guaranteed under section 7(a) of this Act: Provided, That such fee shall not be charged to the
borrower whose loan is guaranteed: and Provided further, That nothing herein shall preclude any
agent of the Administration from collecting a fee approved by the Administration for the
functions described in subsection (h)(2).
(B)
The Administration is authorized to impose and collect, either
directly or through a fiscal and transfer agent, a reasonable penalty on late payments of the fee
authorized under subparagraph (A) in an amount not to exceed 5 percent of such fee per month
plus interest.
(C)
The Administration may contract with an agent to carry out, on
behalf of the Administration, the assessment and collection of the annual fee established under
section 7(a)(23). The agent may receive, as compensation for services, any interest earned on the
fee while in the control of the agent before the time at which the agent is contractually required
to remit the fee to the Administration.

31

SMALL BUSINESS ACT

(5)
(A)
In the event the Administration pays a claim under a guarantee
issued under this subsection, it shall be subrogated fully to the rights satisfied by such payment.
(B)
No State or local law, and no Federal law, shall preclude or limit
the exercise by the Administration of its ownership rights in the portions of loans constituting the
trust or pool against which the trust certificates are issued.
(h)

(1)

Upon the adoption of final rules and regulations, the Administration

shall—
(A)
provide for a central registration of all loans and trust certificates
sold pursuant to subsections (f) and (g) of this section;
(B)
contract with an agent to carry out on behalf of the Administration
the central registration functions of this section and the issuance of trust certificates to facilitate
pooling. Such agent shall provide a fidelity bond or insurance in such amounts as the
Administration determines to be necessary to fully protect the interest of the Government;
(C)
prior to any sale, require the seller to disclose to a purchaser of the
guaranteed portion of a loan guaranteed under this Act and to the purchaser of a trust certificate
issued pursuant to subsection (g), information on terms, conditions, and yield of such instrument.
As used in this paragraph, if the instrument being sold is a loan, the term "seller" does not
include (A) an entity which made the loan or (B) any individual or entity which sells three or
fewer guaranteed loans per year; and
(D)
have the authority to regulate brokers and dealers in guaranteed
loans and trust certificates sold pursuant to subsections (f) and (g) of this section.
(2)
The agent described in paragraph (1)(B) may be compensated through any
of the fees assessed under this section and any interest earned on any funds collected by the
agent while such funds are in the control of the agent and before the time at which the agent is
contractually required to transfer such funds to the Administration or to the holders of the trust
certificates, as appropriate.
(3)
Nothing in this subsection shall prohibit the utilization of a book-entry or
other electronic form of registration for trust certificates. The Administration may, with the
consent of the Secretary of the Treasury, use the book-entry system of the Federal Reserve
System.
§ 6.
(a)
All moneys of the Administration not otherwise employed may be deposited with
the Treasury of the United States subject to check by authority of the Administration. The
Federal Reserve banks are authorized and directed to act as depositaries, custodians, and fiscal
agents for the Administration in the general performance of its powers conferred by this Act.
Any banks insured by the Federal Deposit Insurance Corporation, when designated by the
Secretary of the Treasury, shall act as custodians and financial agents for the Administration.

32

SMALL BUSINESS ACT

Each Federal Reserve bank, when designated by the Administrator as fiscal agent for the
Administration, shall be entitled to be reimbursed for all expenses incurred as such fiscal agent.
(b)
The Administrator shall contribute to the employees' compensation fund, on the
basis of annual billings as determined by the Secretary of Labor, for the benefit payments made
from such fund on account of employees engaged in carrying out functions financed by the
revolving fund established by section 4(c) of this Act. The annual billings shall also include a
statement of the fair portion of the cost of the administration of such fund, which shall be paid by
the Administrator into the Treasury as miscellaneous receipts.
§ 7.
(a)
LOANS TO SMALL BUSINESS CONCERNS; ALLOWABLE PURPOSES;
QUALIFIED BUSINESS; RESTRICTIONS AND LIMITATIONS.—The Administration is
empowered to the extent and in such amounts as provided in advance in appropriation Acts to
make loans for plant acquisition, construction, conversion, or expansion, including the
acquisition of land, material, supplies, equipment, and working capital, and to make loans to any
qualified small business concern, including those owned by qualified Indian tribes, for purposes
of this Act. Such financings may be made either directly or in cooperation with banks or other
financial institutions through agreements to participate on an immediate or deferred (guaranteed)
basis. These powers shall be subject, however, to the following restrictions, limitations, and
provisions:
(1)

IN GENERAL.—

(A)
CREDIT ELSEWHERE.—No financial assistance shall be
extended pursuant to this subsection if the applicant can obtain credit elsewhere. No immediate
participation may be purchased unless it is shown that a deferred participation is not available;
and no direct financing may be made unless it is shown that a participation is not available.
(B)
BACKGROUND CHECKS.—Prior to the approval of any loan
made pursuant to this subsection, or section 503 of the Small Business Investment Act of 1958,
the Administrator may verify the applicant’s criminal background, or lack thereof, through the
best available means, including, if possible, use of the National Crime Information Center
computer system at the Federal Bureau of Investigation.
(2)

LEVEL OF PARTICIPATION IN GUARANTEED LOANS.—

(A)
IN GENERAL.—Except as provided in subparagraph (B), in an
agreement to participate in a loan on a deferred basis under this subsection (including a loan
made under the Preferred Lenders Program), such participation by the Administration shall be
equal to—
(i)
75 percent of the balance of the financing outstanding at the
time of disbursement of the loan, if such balance exceeds $150,000; or
(ii)
85 percent of the balance of the financing outstanding at the
time of disbursement of the loan, if such balance is less than or equal to $150,000.

33

SMALL BUSINESS ACT

(B)

REDUCED PARTICIPATION UPON REQUEST.—

(i)
IN GENERAL.—The guarantee percentage specified by
subparagraph (A) for any loan under this subsection may be reduced upon the request of the
participating lender.
(ii)
PROHIBITION.—The Administration shall not use the
guarantee percentage requested by a participating lender under clause (i) as a criterion for
establishing priorities in approving loan guarantee requests under this subsection.
(C)

INTEREST RATE UNDER PREFERRED LENDERS

PROGRAM.—
(i)
IN GENERAL.—The maximum interest rate for a loan
guaranteed under the Preferred Lenders Program shall not exceed the maximum interest rate, as
determined by the Administration, applicable to other loans guaranteed under this subsection.
(ii)
PREFERRED LENDERS PROGRAM DEFINED.—For
purposes of this subparagraph, the term "Preferred Lenders Program" means any program
established by the Administrator, as authorized under the proviso in section 5(b)(7), under which
a written agreement between the lender and the Administration delegates to the lender—
(I)
complete authority to make and close loans with a
guarantee from the Administration without obtaining the prior specific approval of the
Administration; and
(II)
complete authority to service and liquidate such
loans without obtaining the prior specific approval of the Administration for routine servicing
and liquidation activities, but shall not take any actions creating an actual or apparent conflict of
interest.
(D)
PARTICIPATION UNDER EXPORT WORKING CAPITAL
PROGRAM.—Notwithstanding subparagraph (A), in an agreement to participate in a loan on a
deferred basis under the Export Working Capital Program established pursuant to paragraph
(14)(A), such participation by the Administration shall not exceed 90 percent.
(3)

No loan shall be made under this subsection—

(A)
if the total amount outstanding and committed (by participation or
otherwise) to the borrower from the business loan and investment fund established by this Act
would exceed $1,500,000 (or if the gross loan amount would exceed $2,000,000), except as
provided in subparagraph (B);
(B)
if the total amount outstanding and committed (on a deferred basis)
solely for the purposes provided in paragraph (16) to the borrower from the business loan and

34

SMALL BUSINESS ACT

investment fund established by this Act would exceed $1,750,000, of which not more than
$1,250,000 may be used for working capital, supplies or financings under section 7(a)(14) for
export purposes; and
(C)
if effected either directly or in cooperation with banks or other
lending institutions through agreements to participate on an immediate basis if the amount would
exceed $350,000.
(4)

INTEREST RATES AND PREPAYMENT CHARGES.—

(A)
INTEREST RATES.—Notwithstanding the provisions of the
constitution of any State or the laws of any State limiting the rate or amount of interest which
may be charged, taken, received, or reserved, the maximum legal rate of interest on any
financing made on a deferred basis pursuant to this subsection shall not exceed a rate prescribed
by the Administration, and the rate of interest for the Administration's share of any direct or
immediate participation loan shall not exceed the current average market yield on outstanding
marketable obligations of the United States with remaining periods to maturity comparable to the
average maturities of such loans and adjusted to the nearest one-eighth of 1 per centum, and an
additional amount as determined by the Administration, but not to exceed 1 per centum per
annum: Provided, That for those loans to assist any public or private organization for the
handicapped or to assist any handicapped individual as provided in paragraph (10) of this
subsection, the interest rate shall be 3 per centum per annum.
(B)

PAYMENT OF ACCRUED INTEREST.—

(i)
IN GENERAL.—Any bank or other lending institution
making a claim for payment on the guaranteed portion of a loan made under this subsection shall
be paid the accrued interest due on the loan from the earliest date of default to the date of
payment of the claim at a rate not to exceed the rate of interest on the loan on the date of default,
minus one percent.
(ii)
LOANS SOLD ON SECONDARY MARKET.—If a loan
described in clause (i) is sold on the secondary market, the amount of interest paid to a bank or
other lending institution described in that clause from the earliest date of default to the date of
payment of the claim shall be no more than the agreed upon rate, minus one percent.
(iii)
APPLICABILITY.—Clauses (i) and (ii) shall not apply to
loans made on or after October 1, 2000.
(C)

PREPAYMENT CHARGES.—

(i)
IN GENERAL.—A borrower who prepays any loan
guaranteed under this subsection shall remit to the Administration a subsidy recoupment fee
calculated in accordance with clause (ii) if—
(I)

the loan is for a term of not less than 15 years;

35

SMALL BUSINESS ACT

(II)

the prepayment is voluntary;

(III) the amount of prepayment in any calendar year is
more than 25 percent of the outstanding balance of the loan; and
(IV)

the prepayment is made within the first 3 years after

disbursement of the loan proceeds.
(ii)
SUBSIDY RECOUPMENT FEE.—The subsidy
recoupment fee charged under clause (i) shall be—
(I)
5 percent of the amount of prepayment, if the
borrower repays during the first year after disbursement;
(II)
3 percent of the amount of prepayment, if the
borrower prepays during the second year after disbursement; and
(III) 1 percent of the amount of prepayment, if the
borrower prepays during the third year after disbursement.
(5)
No such loans including renewals and extensions thereof may be made for
a period or periods exceeding twenty- five years, except that such portion of a loan made for the
purpose of acquiring real property or constructing, converting, or expanding facilities may have a
maturity of twenty- five years plus such additional period as is estimated may be required to
complete such construction, conversion, or expansion.
(6)
All loans made under this subsection shall be of such sound value or so
secured as reasonably to assure repayment: Provided, however, That—
(A)
for loans to assist any public or private organization or to assist any
handicapped individual as provided in paragraph (10) of this subsection any reasonable doubt
shall be resolved in favor of the applicant;
(B)
recognizing that greater risk may be associated with loans for
energy measures as provided in paragraph (12) of this subsection, factors in determining "sound
value" shall include, but not be limited to, quality of the product or service; technical
qualifications of the applicant or his employees; sales projections; and the financial status of the
business concern: Provided further, That such status need not be as sound as that required for
general loans under this subsection; and
(C)

[Repealed]

On that portion of the loan used to refinance existing indebtedness held by a bank or other
lending institution, the Administration shall limit the amount of deferred participation to 80 per
centum of the amount of the loan at the time of disbursement: Provided further, That any

36

SMALL BUSINESS ACT

authority conferred by this subparagraph on the Administration shall be exercised solely by the
Administration and shall not be delegated to other than Administration personnel.
(7)
The Administration may defer payments on the principal of such loans for
a grace period and use such other methods as it deems necessary and appropriate to assure the
successful establishment and operation of such concern.
(8)
The Administration may make loans under this subsection to small
business concerns owned and controlled by disabled veterans (as defined in section 4211(3) of
title 38, United States Code).
(9)
The Administration may provide loans under this subsection to finance
residential or commercial construction or rehabilitation for sale: Provided, however, That such
loans shall not be used primarily for the acquisition of land.
(10) The Administration may provide guaranteed loans under this subsection to
assist any public or private organization for the handicapped or to assist any handicapped
individual, including service-disabled veterans, in establishing, acquiring, or operating a small
business concern.
(11) The Administration may provide loans under this subsection to any small
business concern, or to any qualified person seeking to establish such a concern when it
determines that such loan will further the policies established in section 2(c) of this Act, with
particular emphasis on the preservation or establishment of small business concerns located in
urban or rural areas with high proportions of unemployed or low- income individuals or owned
by low- income individuals.
(12) (A)
The Administration may provide loans under this subsection to
assist any small business concern, including start up, to enable such concern to design
architecturally or engineer, manufacture, distribute, market, install, or service energy measures:
Provided, however, That such loan proceeds shall not be used primarily for research and
development.
(B)
The Administration may provide deferred participation loans under
this subsection to finance the planning, design, or installation of pollution control facilities for
the purposes set forth in section 404 of the Small Business Investment Act of 1958.
Notwithstanding the limitation expressed in paragraph (3) of this subsection, a loan made under
this paragraph may not result in a total amount outstanding and committed to a borrower from
the business loan and investment fund of more than $1,000,000.
(13) The Administration may provide financ ings under this subsection to State
and local development companies for the purposes of, and subject to the restrictions in, title V of
the Small Business Investment Act of 1958.
(14) (A)
The Administration may provide extensions of credit, standby
letters of credit, revolving lines of credit for export purposes and other financing to enable small

37

SMALL BUSINESS ACT

business concerns, including small business export trading companies and small business export
management companies, to develop foreign markets. A bank or participating lending institution
may establish the rate of interest on extensions and revolving lines of credit as may be legal and
reasonable.
(B)
When considering loan or guarantee applications, the
Administration shall give weight to export-related benefits, including opening new markets for
United States goods and services abroad and encouraging the involvement of small businesses,
including agricultural concerns, in the export market.
(C)
The Administration shall aggressively market its export financing
program to small businesses.
(15) (A)
The Administration may guarantee loans under this subsection to
qualified employee trusts with respect to a small business concern for the purpose of purchasing
stock of the concern under a plan approved by the Administrator which, when carried out, results
in the qualified employee trust owning at least 51 per centum of the stock of the concern.
(B)
The plan requiring the Administrator's approval under
subparagraph (A) shall be submitted to the Administration by the trustee of such trust with its
application for the guarantee. Such plan shall include an agreement with the Administrator
which is binding on such trust and on the small business concern and which provides that—
(i)
not later than the date the loan guaranteed under
subparagraph (A) is repaid (or as soon thereafter as is consistent with the requirements of section
401(a) of the Internal Revenue Code of 1954), at least 51 per centum of the total stock of such
concern shall be allocated to the accounts of at least 51 per centum of the employees of such
concern who are entitled to share in such allocation,
(ii)
there will be periodic reviews of the role in the
management of such concern of employees to whose accounts stock is allocated, and
(iii)

there will be adequate management to assure management

expertise and continuity.
(C)
In determining whether to guarantee any loan under this paragraph,
the individual business experience or personal assets of employee-owners shall not be used as
criteria, except inasmuch as certain employee-owners may assume managerial responsibilities, in
which case business experience may be considered.
(D)
For purposes of this paragraph, a corporation which is controlled
by any other person shall be treated as a small business concern if such corporation would, after
the plan described in subparagraph (B) is carried out, be treated as a small business concern.
(E)
The Administration shall compile a separate list of applications for
assistance under this paragraph, indicating which applications were accepted and which were

38

SMALL BUSINESS ACT

denied, and shall report periodically to the Congress on the status of employee-owned firms
assisted by the Administration.
(16)

INTERNATIONAL TRADE.—

(A)
IN GENERAL.—If the Administrator determines that a loan
guaranteed under this subsection will allow an eligible small business concern that is engaged in
or adversely affected by international trade to improve its competitive position, the
Administrator may make such loan to assist such concern in—
(i)
the financing of the acquisition, construction, renovation,
modernization, improvement, or expansion of productive facilities or equipment to be used in the
United States in the production of goods and services involved in international trade; or
(ii)
the refinancing of existing indebtedness that is not
structured with reasonable terms and conditions.
(B)
SECURITY.—Each loan made under this paragraph shall be
secured by a first lien position or first mortgage on the property or equipment financed by the
loan or on other assets of the small business concern.
(C)
ENGAGED IN INTERNATIONAL TRADE.—For purposes of
this paragraph, a small business concern is engaged in international trade if, as determined by the
Administrator, the small business concern is in a position to expand existing export markets or
develop new export markets.
(D)
ADVERSELY AFFECTED BY INTERNATIONAL TRADE.—
For purposes of this paragraph, a small business concern is adversely affected by international
trade if, as determined by the Administrator, the small business concern—
(i)

is confronting increased competition with foreign firms in

(ii)

is injured by such competition.

the relevant market; and

(E)
FINDINGS BY CERTAIN FEDERAL AGENCIES.—For
purposes of subparagraph (D)(ii) the Administrator shall accept any finding of injury by the
International Trade Commission or any finding of injury by the Secretary of Commerce pursuant
to chapter 3 of title II of the Trade Act of 1974.
(17) The Administration shall authorize lending institutions and other entities
in addition to banks to make loans authorized under this subsection.
(18)

GUARANTEE FEES.—

39

SMALL BUSINESS ACT

(A)
IN GENERAL.—With respect to each loan guaranteed under this
subsection (other than a loan that is repayable in 1 year or less), the Administration shall collect a
guarantee fee, which shall be payable by the participating lender, and may be charged to the
borrower, as follows:
(i)
A guarantee fee not to exceed 2 percent of the deferred
participation share of a total loan amount that is not more than $150,000.
(ii)
A guarantee fee not to exceed 3 percent of the deferred
participation share of a total loan amount that is more than $150,000, but not more than
$700,000.
(iii)
A guarantee fee not to exceed 3.5 percent of the deferred
participation share of a total loan amount that is more than $700,000.
(iv)
In addition to the fee under clause (iii), a guarantee fee
equal to 0.25 percent of any portion of the deferred participation share that is more than
$1,000,000.
(B)
RETENTION OF CERTAIN FEES.—Lenders participating in the
programs established under this subsection may retain not more than 25 percent of a fee
collected under subparagraph (A)(i).
(C)

[Deleted.]

(19) (A)
In addition to the Preferred Lenders Program authorized by the
proviso in section 5(b)(7), the Administration is authorized to establish a Certified Lenders
Program for lenders who establish their knowledge of Administration laws and regulations
concerning the guaranteed loan program and their proficiency in program requirements. The
designation of a lender as a certified lender shall be suspended or revoked at any time that the
Administration determines that the lender is not adhering to its rules and regulations or that the
loss experience of the lender is excessive as compared to other lenders, but such suspension or
revocation shall not affect any outstanding guarantee.
(B)
In order to encourage all lending institutions and other entities
making loans authorized under this subsection to provide loans of $50,000 or less in guarantees
to eligible small business loan applicants, the Administration shall develop and allow
participating lenders to solely utilize a uniform and simplified loan form for such loans.
(C)

Authority to liquidate loans.—

(i)
IN GENERAL.—The Administrator may permit lenders
participating in the Certified Lenders Program to liquidate loans made with a guarantee from the
Administration pursuant to a liquidation plan approved by the Administrator.

40

SMALL BUSINESS ACT

(ii)
Automatic approval.—If the Administrator does not
approve or deny a request for approval of a liquidation plan within 10 business days of the date
on which the request is made (or with respect to any routine liquidation activity under such a
plan, within 5 business days) such request shall be deemed to be approved.
(20) (A)
The Administration is empowered to make loans either directly or
in cooperation with banks or other financial institutions through agreements to participate on an
immediate or deferred (guaranteed) basis to small business concerns eligible for assistance under
subsection (j)(10) and section 8(a). Such assistance may be provided only if the Administration
determines that—
(i)
the type and amount of such assistance requested by such
concern is not otherwise available on reasonable terms from other sources;
(ii)
with such assistance such concern has a reasonable
prospect for operating soundly and profitably within a reasonable period of time;
(iii)
the proceeds of such assistance will be used within a
reasonable time for plant construction, conversion, or expansion, including the acquisition of
equipment, facilities, machinery, supplies, or material or to supply such concern with working
capital to be used in the manufacture of articles, equipment, supplies, or material for defense or
civilian production or as may be necessary to insure a well-balanced national economy; and
(iv)
such assistance is of such sound value as reasonably to
assure that the terms under which it is provided will not be breached by the small business
concern.
(B)
(i)
No loan shall be made under this paragraph if the total
amount outstanding and committed (by participation or otherwise) to the borrower would exceed
$750,000.
(ii)
Subject to the provisions of clause (i), in agreements to
participate in loans on a deferred (guaranteed) basis, participation by the Administration shall be
not less than 85 per centum of the balance of the financing outstanding at the time of
disbursement.
(iii)
The rate of interest on financings made on a deferred
(guaranteed) basis shall be legal and reasonable.
(iv)

Financings made pursuant to this paragraph shall be subject

to the following limitations:
(I)
No immediate participation may be purchased
unless it is shown that a deferred participation is not available.

41

SMALL BUSINESS ACT

(II)

No direct financing may be made unless it is shown

that a participation is unavailable.
(C)
A direct loan or the Administration's share of an immediate
participation loan made pursuant to this paragraph shall be any secured debt instrument—
(i)

that is subordinated by its terms to all other borrowings of

the issuer;
(ii)
the rate of interest on which shall not exceed the current
average market yield on outstanding marketable obligations of the United States with remaining
periods to maturity comparable to the average maturities of such loan and adjusted to the nearest
one-eighth of 1 per centum;
(iii)

the term of which is not more than twenty-five years; and

(iv)
the principal on which amortized at such rate as may be
deemed appropriate by the Administration, and the interest on which is payable not less often
than annually.
(21) (A)
The Administration may make loans on a guaranteed basis under
the authority of this subsection—
(i)
to a small business concern that has been (or can
reasonably be expected to be) detrimentally affected by—
(I)
Department of Defense installation; or

the closure (or substantial reduction) of a

(II)
the termination (or substantial reduction) of a
Department of Defense program on which such small business was a prime contractor or
subcontractor (or supplier) at any tier; or
(ii)
to a qualified individual or a veteran seeking to establish
(or acquire) and operate a small business concern.
(B)
Recognizing that greater risk may be associated with a loan to a
small business concern described in subparagraph (A)(i), any reasonable doubts concerning the
firm's proposed business plan for transition to nondefense-related markets shall be resolved in
favor of the loan applicant when making any determination regarding the sound value of the
proposed loan in accordance with paragraph (6).
(C)
Loans pursuant to this paragraph shall be authorized in such
amounts as provided in advance in appropriation Acts for the purposes of loans under this
paragraph.

42

SMALL BUSINESS ACT

(D)

For purposes of this paragraph a qualified individual is—

(i)
a member of the Armed Forces of the United States,
honorably discharged from active duty involuntarily or pursuant to a program providing bonuses
or other inducements to encourage voluntary separation or early retirement;
(ii)
an employee of a prime contractor, subcontractor, or
supplier at any tier of a Department of Defense program whose employment is involuntarily
terminated (or voluntarily terminated pursuant to a program offering inducements to encourage
voluntary separation or early retirement) due to the termination (or substantial reduction) of a
Department of Defense program.
(E)
JOB CREATION AND COMMUNITY BENEFIT.—In providing
assistance under this paragraph, the Administration shall develop procedures to ensure, to the
maximum extent practicable, that such assistance is used for projects that—
(i)

have the greatest potential for—

(I)
creating new jobs for individuals whose
employment is involuntarily terminated due to reductions in Federal defense expenditures; or
(II)
preventing the loss of jobs by employees of small
business concerns described in subparagraph (A)(i); and
(ii)
have substantial potential for stimulating new economic
activity in communities most affected by reductions in Federal defense expenditures.
(22) The Administration is authorized to permit participating lenders to impose
and collect a reasonable penalty fee on late payments of loans guaranteed under this subsection
in an amount not to exceed 5 percent of the monthly loan payment per month plus interest.
(23)

YEARLY FEE.—

(A)
IN GENERAL.—With respect to each loan approved under this
subsection, the Administration shall assess, collect, and retain a fee, not to exceed 0.55 percent
per year of the outstanding balance of the deferred participation share of the loan, in an amount
established once annually by the Administration in the Administration’s annual budget request to
Congress, as necessary to reduce to zero the cost to the Administration of making guarantees
under this subsection. As used in this paragraph, the term “cost” has the meaning given that term
in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a).
(B)
PAYER.—The yearly fee assessed under subparagraph (A) shall
be payable by the participating lender and shall not be charged to the borrower.
(C)
LOWERING OF BORROWER FEES.—If the Administration
determines that fees paid by lenders and by small business borrowers for guarantees under this

43

SMALL BUSINESS ACT

subsection may be reduced, consistent with reducing to zero the cost to the Administration of
making such guarantees—
(i)
the Administration shall first consider reducing fees paid by
small business borrowers under clauses (i) through (iii) of paragraph (18)(A), to the maximum
extent possible; and
(ii)
fees paid by small business borrowers shall not be
increased above the levels in effect on the date of enactment of this subparagraph.
(24) NOTIFICATION REQUIREMENT.—The Administration shall notify the
Committees on Small Business of the Senate and the House of Representatives not later tha n 15
days before making any significant policy or administrative change affecting the operation of the
loan program under this subsection.
(25)

LIMITATION ON CONDUCTING PILOT PROJECTS.—

(A)
IN GENERAL.—Not more than 10 percent of the total number of
loans guaranteed in any fiscal year under this subsection may be awarded as part of a pilot
program which is commenced by the Administrator on or after October 1, 1996.
(B)
PILOT PROGRAM DEFINED.—In this paragraph, the term "pilot
program" means any lending program initiative, project, innovation, or other activity not
specifically authorized by law.
(C)
LOW DOCUMENTATION LOAN PROGRAM.—The
Administrator may carry out the low documentation loan program for loans of $100,000 or less
only through lenders with significant experience in making small business loans. Not later than
90 days after the date of enactment of this subsection, the Administrator shall promulgate
regulations defining the experience necessary for participation as a lender in the lo w
documentation loan program.
(26) CALCULATION OF SUBSIDY RATE.—All fees, interest, and profits
received and retained by the Administration under this subsection shall be included in the
calculations made by the Director of the Office of Management and Budget to offset the cost (as
that term is defined in section 502 of the Federal Credit Reform Act of 1990) to the
Administration of purchasing and guaranteeing loans under this Act.
(27)

Repealed.

(28) LEASING.—In addition to such other lease arrangements as may be
authorized by the Administration, a borrower may permanently lease to one or more tenants not
more than 20 percent of any property constructed with the proceeds of a loan guaranteed under
this subsection, if the borrower permanently occup ies and uses not less than 60 percent of the
total business space in the property.

44

SMALL BUSINESS ACT

(29) REAL ESTATE APPRAISALS.—With respect to a loan under this
subsection that is secured by commercial real property, an appraisal of such property by a State
licensed or certified appraiser—
(A)
shall be required by the Administration in connection with any
such loan for more than $250,000; or
(B)
may be required by the Administration or the lender in connection
with any such loan for $250,000 or less, if such appraisal is necessary for appropriate evaluation
of creditworthiness.
(30) OWNERSHIP REQUIREMENTS.—Ownership requirements to
determine the eligibility of a small business concern that applies for assistance under any credit
program under this Act shall be determined without regard to any ownership interest of a spouse
arising solely from the application of the community property laws of a State for purposes of
determining marital interests.
(31)

EXPRESS LOANS.
(A)

DEFINITIONS.—As used in this paragraph:

(i)
The term “express lender” means any lender authorized by
the Administration to participate in the Express Loan Program.
(ii)
The term “express loan” means any loan made pursuant to
this paragraph in which a lender utilizes to the maximum extent practicable its own loan
analyses, procedures, and documentation.
(iii)
The term “Express Loan Program” means the program for
express loans established by the Administration under paragraph (25)(B), as in existence on
April 5, 2004, with a guaranty rate of not more than 50 percent.
(B)
RESTRICTION TO EXPRESS LENDER.—The authority to make
an express loan shall be limited to those lenders deemed qualified to make such loans by the
Administration. Designation as an express lender for purposes of making an express loan shall
not prohibit such lender from taking any other action authorized by the Administration for that
lender pursuant to this subsection.
(C)
GRANDFATHERING OF EXISTING LENDERS.—Any express
lender shall retain such designation unless the Administration determines that the express lender
has violated the law or regulations promulgated by the Administration or modifies the
requirements to be an express lender and the lender no longer satisfies those requirements.
(D)
MAXIMUM LOAN AMOUNT.—The maximum loan amount
under the Express Loan Program is $350,000.

45

SMALL BUSINESS ACT

(E)
OPTION TO PARTICIPATE.—Except as otherwise provided in
this paragraph, the Administration shall take no regulatory, policy, or administrative action,
without regard to whether such action requires notification pursuant to paragraph (24), that has
the effect of requiring a lender to make an express loan pursuant to subparagraph (D).
(b)
Except as to agricultural enterprises as defined in section 18(b)(1) of this Act, the
Administration also is empowered to the extent and in such amounts as provided in advance in
appropriation Acts—
(1)
(A)
to make such loans (either directly or in cooperation with banks or
other lending institutions through agreements to participate on an immediate or deferred
(guaranteed) basis as the Administration may determine to be necessary or appropriate to repair,
rehabilitate or replace property, real or personal, damaged or destroyed by or as a result of
natural or other disasters,: Provided, That such damage or destruction is not compensated for by
insurance or otherwise: And provided further, That the Administration may increase the amount
of the loan by up to an additional 20 per centum if it determines such increase to be necessary or
appropriate in order to protect the damaged or destroyed property from possible future disasters
by taking mitigating measures, including, but not limited to, construction of retaining walls and
sea walls, grading and contouring land, relocating utilities and modifying structures;
(B)
to refinance any mortgage or other lien against a totally destroyed
or substantially damaged home or business concern: Provided, That no loan or guarantee shall
be extended unless the Administration finds that (i) the applicant is not able to obtain credit
elsewhere; (ii) such property is to be repaired, rehabilitated, or replaced; (iii) the amount
refinanced shall not exceed the amount of physical loss sustained; and (iv) such amount shall be
reduced to the extent such mortgage or lien is satisfied by insurance or otherwise; and
(C)
during fiscal years 2000 through 2004, to establish a predisaster
mitigation program to make such loans (either directly or in cooperation with banks or other
lending institutions through agreements to participate on an immediate or deferred (guaranteed)
basis), as the Administrator may determine to be necessary or appropriate, to enable small
businesses to use mitigation techniques in support of a formal mitigation program established by
the Federal Emergency Management Agency, except that no loan or guarantee may be extended
to a small business under this subparagraph unless the Administration finds that the small
business is otherwise unable to obtain credit for the purposes described in this subparagraph;
(2)
to make such loans (either directly or in cooperation with banks or other
lending institutions through agreements to participate on an immediate or deferred (guaranteed)
basis as the Administration may determine to be necessary or appropriate to any small business
concern or small agricultural cooperative located in an area affected by a disaster, (including
drought), with respect to both farm-related and nonfarm-related small business concerns, if the
Administration determines that the concern or the cooperative has suffered a substantial
economic injury as a result of such disaster and if such disaster constitutes—
(A)
a major disaster, as determined by the President under the Disaster
Relief and Emergency Assistance Act; or

46

SMALL BUSINESS ACT

(B)
a natural disaster, as determined by the Secretary of Agriculture
pursuant to the Consolidated Farmers Home Administration Act of 1961 (7 U.S.C. 1961); or
(C)
a disaster, as determined by the Administrator of the Small
Business Administration; or
(D)
if no disaster declaration has been issued pursuant to subparagraph
(A), (B), or (C), the Governor of a State in which a disaster has occurred may certify to the Small
Business Administration that small business concerns or small agricultural cooperatives (1) have
suffered economic injury as a result of such disaster, and (2) are in need of financial assistance
which is not available on reasonable terms in the disaster stricken area. Not later than 30 days
after the date of receipt of such certification by a Governor of a State, the Administration shall
respond in writing to that Governor on its determination and the reasons therefore, and may then
make such loans as would have been available under this paragraph if a disaster declaration had
been issued.
Provided, That no loan or guarantee shall be extended pursuant to this paragraph (2) unless the
Administration finds that the applicant is not able to obtain credit elsewhere.
(3)

(A)

In this paragraph—

(i)
the term “essential employee” means an individual who is
employed by a small business concern and whose managerial or technical expertise is critical to
the successful day-to-day operations of that small business concern;
(ii)
the term “period of military conflict” has the meaning
given the term in subsection (n)(1); and
(iii)
the term “substantial economic injury” means an economic
harm to a business concern that results in the inability of the business concern—
(I)

to meet its obligations as they mature;

(II)

to pay its ordinary and necessary operating

expenses; or
(III) to market, produce, or provide a product or service
ordinarily marketed, produced, or provided by the business concern.
(B)
The Administration may make such disaster loans (either directly
or in cooperation with banks or other lending institutions through agreements to participate on an
immediate or deferred basis) to assist a small business concern that has suffered or that is likely
to suffer substantial economic injury as the result of an essential employee of such small
business concern being ordered to active military duty during a period of military conflict.

47

SMALL BUSINESS ACT

(C)
A small business concern described in subparagraph (B) shall be
eligible to apply for assistance under this paragraph during the period beginning on the date on
which the essential employee is ordered to active duty and ending on the date that is 90 days
after the date on which such essential employee is discharged or released from active duty.
(D)
Any loan or guarantee extended pursuant to this paragraph shall be
made at the same interest rate as economic injury loans under paragraph (2).
(E)
No loan may be made under this paragraph, either directly or in
cooperation with banks or other lending institutions through agreements to participate on an
immediate or deferred basis, if the total amount outstanding and committed to the borrower
under this subsection would exceed $1,500,000, unless such applicant constitutes a major source
of employment in its surrounding area, as determined by the Administration, in which case the
Administration, in its discretion, may waive the $1,500,000 limitation.
(F)
For purposes of assistance under this paragraph, no declaration of a
disaster area shall be required.
[THE FOLLOWING PARAGRAPHS PRECEDING SUBSECTION 7(c)
APPLY TO THE ENTIRE SUBSECTION 7(b).]
No loan under this subsection, including renewals and extensions thereof, may be
made for a period or periods exceeding thirty years: Provided, That the Administrator may
consent to a suspension in the payment of principal and interest charges on, and to an extension
in the maturity of, the Federal share of any loan under this subsection for a period not to exceed
five years, if (A) the borrower under such loan is a homeowne r or a small business concern, (B)
the loan was made to enable (i) such homeowner to repair or replace his home, or (ii) such
concern to repair or replace plant or equipment which was damaged or destroyed as the result of
a disaster meeting the requirement s of clause (A) or (B) of paragraph (2) of this subsection, and
(C) the Administrator determines such action is necessary to avoid severe financial hardship:
Provided further, That the provisions of paragraph (1) of subsection (c) of this section shall not
be applicable to any such loan having a maturity in excess of twenty years. Notwithstanding the
provisions of any other law, the interest rate on the Administration's share of any loan made
under subsection (b), except as provided in subsection (c), shall not exceed the average annual
interest rate on all interest-bearing obligations of the United States then forming a part of the
public debt as computed at the end of the fiscal year next preceding the date of the loan and
adjusted to the nearest one-eighth of 1 per centum plus one-quarter of 1 per centum: Provided,
however, That the interest rate for loans made under paragraphs (1) and (2) hereof shall not
exceed the rate of interest which is in effect at the time of the occurrence of the disaster. In
agreements to participate in loans on a deferred basis under this subsection, such participation by
the Administration shall not be in excess of 90 per centum of the balance of the loan outstanding
at the time of disbursement. Notwithstanding any other provision of law, the interest rate on the
Administration's share of any loan made pursuant to paragraph (1) of this subsection to repair or
replace a primary residence and/or replace or repair damaged or destroyed personal property, less
the amount of compensation by insurance or otherwise, with respect to a disaster occurring on or
after July 1, 1976, and prior to October 1, 1978, shall be: 1 per centum on the amount of such

48

SMALL BUSINESS ACT

loan not exceeding $10,000, and 3 per centum on the amount of such loan over $10,000 but not
exceeding $40,000. The interest rate on the Administration's share of the first $250,000 of all
other loans made pursuant to paragraph (1) of this subsection, with respect to a disaster occurring
on or after July 1, 1976, and prior to October 1, 1978, shall be 3 per centum. All repayments of
principal on the Administration's share of any loan made under the above provisions shall first be
applied to reduce the principal sum of such loan which bears interest at the lower rates provided
in this paragraph. The principal amount of any loan made pursuant to paragraph (1) in
connection with a disaster which occurs on or after April 1, l977, but prior to January 1, 1978,
may be increased by such amount, but not more than $2,000, as the Administration determines to
be reasonable in light of the amount and nature of loss, damage, or injury sustained in order to
finance the installation of insulation in the property which was lost, damaged, or injured, if the
uninsured, damaged portion of the property is 10 per centum or more of the market value of the
property at the time of the disaster. Not later than June 1, 1978, the Administration shall prepare
and transmit to the Select Committee on Small Business of the Senate, the Committee on Small
Business of the House of Representatives, and the Committees of the Senate and House of
Representatives having jurisdiction over measures relating to energy conservation, a report on its
activities under this paragraph, including therein an evaluation of the effect of such activities on
encouraging the installation of insulation in property which is repaired or replaced after a disaster
which is subject to this paragraph, and its recommendations with respect to the continuation,
modification, or termination of such activities.
In the administration of the disaster loan program under paragraphs (1), (2), and
(4) of this subsection, in the case of property loss or damage or injury resulting from a major
disaster as determined by the President or a disaster as determined by the Administrator which
occurs on or after January 1, 1971, and prior to July 1, 1973, the Small Business Administration,
to the extent such loss or damage or injury is not compensated for by insurance or otherwise—
(A)
may make any loan for repair, rehabilitation, or replacement of
property damaged or destroyed without regard to whether the required financial assistance is
otherwise available from private sources;
(B)
may, in the case of the total destruction or substantial property
damage of a home or business concern, refinance any mortgage or other liens outstanding against
the destroyed or damaged property if such property is to be repaired, rehabilitated, or replaced,
except that (1) in the case of a business concern, the amount refinanced shall not exceed the
amount of the physical loss sustained, and (2) in the case of a home, the amount of each monthly
payment of principal and interest on the loan after refinancing under this clause shall be not less
than the amount of each such payment made prior to such refinancing;
(C)
may, in the case of a loan made under clause (A) or a mortgage or
other lien refinanced under clause (B) in connection with the destruction of, or substantial
damage to, property owned and used as a residence by an individual who by reason of
retirement, disability, or other similar circumstances relies for support on survivor, disability, or
retirement benefits under a pension, insurance, or other program, consent to the suspension of the
payments of the principal of that loan, mortgage, or lien during the lifetime of that individual and

49

SMALL BUSINESS ACT

his spouse for so long as the Administration determines that making such payments would
constitute a substantial hardship;
(D)
shall, notwithstanding the provisions of any other law and upon
presentation by the applicant of proof of loss or damage or injury and a bona fide estimate of cost
of repair, rehabilitation, or replacement, cancel the principal of any loan made to cover a loss or
damage or injury resulting from such disaster, except that—
(i)
with respect to a loan made in connection with a disaster
occurring on or after January 1, 1971, but prior to January 1, 1972, the total amount so canceled
shall not exceed $2,500, and the interest on the balance of the loan shall be at a rate of 3 per
centum per annum; and
(ii)
with respect to a loan made in connection with a disaster
occurring on or after January 1, 1972, but prior to July 1, 1973, the total amount so canceled
shall not exceed $5,000, and the interest on the balance of the loan shall be at a rate of 1 per
centum per annum.
With respect to any loan referred to in clause (D) which is outstanding on the date of enactment
of this paragraph, the Administrator shall—
(i)
make such change in the interest rate on the balance of such
loan as is required under that clause effective as of such date of enactment; and
(ii)
in applying the limitation set forth in that clause with
respect to the total amount of such loan which may be canceled, consider as part of the amount
so canceled any part of such loan which was previously canceled pursuant to section 231 of the
Disaster Relief Act of 1970.
Whoever wrongfully misapplies the proceeds of a loan obtained under this subsection
shall be civilly liable to the Administrator in an amount equal to one-and-one- half times the
original principal amount of the loan.
(E)
A State grant made on or prior to July 1, 1979, shall not be
considered compensation for the purpose of applying the provisions of section 312(a) of the
Disaster Relief and Emergency Assistance Act to a disaster loan under paragraph (1), (2), or (4)
of this subsection.
(c)
(1)
The Administration may further extend the maturity of or renew any loan
made pursuant to this section, or any loan transferred to the Administration pursuant to
Reorganization Plan Numbered 2 of 1954, or Reorganization Plan Numbered 1 of 1957, for
additional periods not to exceed ten years beyond the period stated therein, if such extension or
renewal will aid in the orderly liquidation of such loan.
(2)
During any period in which principal and interest charges are suspended
on the Federal share of any loan, as provided in subsection (b), the Administrator shall, upon the

50

SMALL BUSINESS ACT

request of any person, firm, or corporation having a participation in such loan, purchase such
participation, or assume the obligation of the borrower, for the balance of such period, to make
principal and interest payments on the non-Federal share of such loan: Provided, That no such
payments shall be made by the Administrator in behalf of any borrower unless (i) the
Administrator determines that such action is necessary in order to avoid a default, and (ii) the
borrower agrees to make payments to the Administration in an aggregate amount equal to the
amount paid in its behalf by the Administrator, in such manner and at such times (during or after
the term of the loan) as the Administrator shall determine having due regard to the purposes
sought to be achieved by this paragraph.
(3)
With respect to a disaster occurring on or after October 1, 1978, and prior
to the effective date of this Act, on the Administration's share of loans made pursuant to
paragraph (1) of subsection (b)—
(C)
if the loan proceeds are to repair or replace property damaged or
destroyed and if the applicant is a business concern which is able to obtain sufficient credit
elsewhere, the interest rate shall not exceed the current average market yield on outstanding
marketable obligations of the United States with remaining periods to maturity comparable to the
average maturities of such loans and adjusted to the nearest one-eighth of 1 percent, and an
additional amount as determined by the Administration, but not to exceed 1 percent: Provided,
That three years after such loan is fully disbursed and every two years thereafter for the term of
the loan, if the Administration determines that the borrower is able to obtain a loan from
non-Federal sources at reasonable rates and terms for loans of similar purposes and periods of
time, the borrower shall, upon request by the Administration, apply for and accept such a loan in
sufficient amount to repay the Administration: Provided further, That no loan under subsection
(b)(1) shall be made, either directly or in cooperation with banks or other lending institutions
through agreements to participate on an immediate or deferred basis, if the total amount
outstanding and committed to the borrower under such subsection would exceed $500,000 for
each disaster, unless an applicant constitutes a major source of employment in an area suffering a
disaster, in which case the Administration, in its discretion, may waive the $500,000 limitation.
(4)
Notwithstanding the provisions of any other law, the interest rate on the
Federal share of any loan made under subsection (b) shall be—
(A)
in the case of a homeowner unable to secure credit elsewhere, the
rate prescribed by the Administration but not more than one-half the rate determined by the
Secretary of the Treasury taking into consideration the current ave rage market yield on
outstanding marketable obligations of the United States with remaining periods to maturity
comparable to the average maturities of such loans plus an additional charge of not to exceed 1
per centum per annum as determined by the Administrator, and adjusted to the nearest
one-eighth of 1 per centum but not to exceed 8 per centum per annum;
(B)
in the case of a homeowner able to secure credit elsewhere, the rate
prescribed by the Administration but not more than the rate determined by the Secretary of the
Treasury taking into consideration the current average market yield on outstanding marketable
obligations of the United States with remaining periods to maturity comparable to the average

51

SMALL BUSINESS ACT

maturities of such loans plus an additional charge of not to exceed 1 per centum per annum as
determined by the Administrator, and adjusted to the nearest one-eighth of 1 per centum;
(C)
in the case of a business concern unable to obtain credit elsewhere,
not to exceed 8 per centum per annum;
(D)
in the case of a business concern able to obtain credit elsewhere,
the rate prescribed by the Administration but not in excess of the rate prevailing in private
market for similar loans and not more than the rate prescribed by the Administration as the
maximum interest rate for deferred participation (guaranteed) loans under section 7(a) of this
Act. Loans under this subparagraph shall be limited to a maximum term of three years.
(5)
Notwithstanding the provisions of any other law, the interest rate on the
Federal share of any loan made under subsection (b)(1) and (b)(2) on account of a disaster
commencing on or after October 1, 1982, shall be—
(A)
in the case of a homeowner unable to secure credit elsewhere, the
rate prescribed by the Administration but not more than one-half the rate determined by the
Secretary of the Treasury taking into consideration the current average market yield on
outstanding marketable obligations of the United States with remaining periods to maturity
comparable to the average maturities of such loan plus an additional charge of not to exceed 1
per centum per annum as determined by the Administrator, and adjusted to the nearest
one-eighth of 1 per centum, but not to exceed 4 per centum per annum;
(B)
in the case of a homeowner able to secure credit elsewhere, the rate
prescribed by the Administration but not more than the rate determined by the Secretary of the
Treasury taking into consideration the current average market yield on outstanding marketable
obligations of the United States with remaining periods to maturity comparable to the average
maturities of such loans plus an additional charge of not to exceed 1 per centum per annum as
determined by the Administrator; and adjusted to the nearest one-eighth of 1 per centum, but not
to exceed 8 per centum per annum;
(C)
in the case of a business or other concern, including agricultural
cooperatives, unable to obtain credit elsewhere, not to exceed 4 per centum per annum;
(D)
in the case of a business concern able to obtain credit elsewhere,
the rate prescribed by the Administration but not in excess of the lowest of (i) the rate prevailing
in the private market for similar loans, (ii) the rate prescribed by the Administration as the
maximum interest rate for deferred participation (guaranteed) loans under section 7(a) of this
Act, or (iii) 8 per centum per annum. Loans under this subparagraph shall be limited to a
maximum term of three years.
(6)
Notwithstanding the provisions of any other law, such loans, subject to the
reductions required by subparagraphs (A) and (B) of paragraph 7(b)(1), shall be in amounts
equal to 100 per centum of loss. The interest rates for loans made under paragraphs 7(b)(1) and
(2), as determined pursuant to paragraph (5), shall be the rate of interest which is in effect on the

52

SMALL BUSINESS ACT

date of the disaster commenced: Provided, That no loan under paragraphs 7(b)(1) and (2) shall
be made, either directly or in cooperation with banks or other lending institutions through
agreements to participate on an immediate or deferred (guaranteed) basis, if the total amount
outstanding and committed to the borrower under subsection 7(b) would exceed $500,000 for
each disaster unless an applicant constitutes a major source of employment in an area suffering a
disaster, in which case the Administration, in its discretion, may waive the $500,000 limitation.
Employees of concerns sharing a common business premises shall be aggregated in determining
"major source of employment" status for nonprofit applicants owning such premises. Provided
further, That the Administration, subject to the reductions required by subparagraphs (A) and (B)
of paragraph 7(b)(1), shall not reduce the amount of eligibility for any homeowner on account of
loss of real estate to less than $100,000 for each disaster nor for any homeowner or lessee on
account of loss of personal property to less than $20,000 for each disaster, such sums being in
addition to any eligible refinancing: Provided further, That the Administration shall not require
collateral for loans of $10,000 or less which are made under paragraph (1) of subsection (b).
With respect to any loan which is outstanding on the date of enactment of this paragraph and
which was made on account of a disaster commencing on or after October 1, 1982, the
Administrator shall make such change in the interest rate on the balance of such loan as is
required herein effective as of the date of enactment.
(7)
The Administration shall not withhold disaster assistance pursuant to this
paragraph to nurseries who are victims of drought disasters. As used in section 7(b)(2) the term
"an area affected by a disaster" includes any county, or county contiguous thereto, determined to
be a disaster by the President, the Secretary of Agriculture or the Administrator of the Small
Business Administration.
(d)
The Administration shall not fund any Small Business Development Center or
any variation thereof, except as authorized in section 21 of this Act.
(e)

[RESERVED].

(f)

[RESERVED].

(g)

[Repealed].

(h)
(1)
The Administration also is empowered, where other financial assistance is
not available on reasonable terms, to make such loans (either directly or in cooperation with
banks or other lending institutions through agreements to participate on an immediate or deferred
basis) as the Administration may determine to be necessary or appropriate—
(A)

to assist any public or private organization—

(i)
which is organized under the laws of the United States or of
any State, operated in the interest of handicapped individuals, the net income of which does not
inure in whole or in part to the benefit of any shareholder or other individual;

53

SMALL BUSINESS ACT

(ii)
which complies with any applicable occupational health
and safety standard prescribed by the Secretary of Labor; and
(iii)
which, in the production of commodities and in the
provision of services during any fiscal year in which it receives financial assistance under this
subsection, employs handicapped individuals for not less than 75 per centum of the man-hours
required for the production or provision of the commodities or services; or
(B)
to assist any handicapped individual in establishing, acquiring, or
operating a small business concern.
(2)
The Administration's share of any loan made under this subsection shall
not exceed $350,000, nor may any such loan be made if the total amount outstanding and
committed (by participation or otherwise) to the borrower from the business loan and investment
fund established by section 4(c)(1)(B) of this Act would exceed $350,000. In agreements to
participate in loans on a deferred basis under this subsection, the Administration's participation
may total 100 per centum of the balance of the loan at the time of disbursement. The
Administration's share of any loan made under this subsection shall bear interest at the rate of 3
per centum per annum. The maximum term of any such loan, including extensions and renewals
thereof, may not exceed fifteen years. All loans made under this subsection shall be of such
sound value or so secured as reasonably to assure repayment: Provided, however, That any
reasonable doubt shall be resolved in favor of the applicant.
(3)
For purposes of this subsection, the term "handicapped individual" means
a person who has a physical, mental, or emotional impairment, defect, ailment, disease, or
disability of a permanent nature which in any way limits the selection of any type of employment
for which the person would otherwise be qualified or qualifiable.
(i)
(1)
The Administration also is empowered to make, participate (on an
immediate basis) in, or guarantee loans, repayable in not more than fifteen years, to any small
business concern, or to any qualified person seeking to establish such a concern, when it
determines that such loans will further the policies established in section 2(b) of this Act, with
particular emphasis on the preservation or establishment of small business concerns located in
urban or rural areas with high proportions of unemployed or low- income individua ls, or owned
by low- income individuals: Provided, however, That no such loans shall be made, participated
in, or guaranteed if the total of such Federal assistance to a single borrower outstanding at any
one time would exceed $100,000. The Administration may defer payments on the principal of
such loans for a grace period and use such other methods as it deems necessary and appropriate
to assure the successful establishment and operation of such concern. The Administration may,
in its discretion, as a cond ition of such financial assistance, require that the borrower take steps
to improve his management skills by participating in a management training program approved
by the Administration: Provided, however, That any management training program so approved
must be of sufficient scope and duration to provide reasonable opportunity for the individuals
served to develop entrepreneurial and managerial self- sufficiency.

54

SMALL BUSINESS ACT

(2)
The Administration shall encourage, as far as possible, the participation of
the priva te business community in the program of assistance to such concerns, and shall seek to
stimulate new private lending activities to such concerns through the use of the loan guarantees,
participations in loans, and pooling arrangements authorized by this subsection.
(3)
To insure an equitable distribution between urban and rural areas for loans
between $3,500 and $100,000 made under this subsection the Administration is authorized to use
the agencies and agreements and delegations developed under title III of the Economic
Opportunity Act of 1964, as amended, as it shall determine necessary.
(4)
The Administration shall provide for the continuing evaluation of
programs under this subsection, including full information on the location, income
characteristics, and types of businesses and individuals assisted, and on new private lending
activity stimulated, and the results of such evaluation together with recommendations shall be
included in the report required by section 10(a) of this Act.
(5)
Loans made pursuant to this subsection (including immediate participation
in and guarantees of such loans) shall have such terms and conditions as the Administration shall
determine, subject to the following limitations—
(A)

there is reasonable assurance of repayment of the loan;

(B)
the financial assistance is not otherwise available on reasonable
terms from private sources or other Federal, State, or local programs;
(C)
the amount of the loan, together with other funds available, is
adequate to assure completion of the project or achievement of the purposes for which the loan is
made;
(D)
the loan bears interest at a rate not less than (i) a rate determined
by the Secretary of the Treasury, taking into consideration the average market yield on
outstanding Treasury obligations of comparable maturity, plus (ii) such additional charge, if any,
toward covering other costs of the program as the Administration may determine to be consistent
with its purposes: Provided, however, That the rate of interest charged on loans made in
redevelopment areas designated under the Public Works and Economic Development Act of
1965 (42 U.S.C. 3108 et seq.) shall not exceed the rate currently applicable to new loans made
under section 201 of that Act (42 U.S.C. 3141); and
(E)
fees not in excess of amounts necessary to cover administrative
expenses and probable losses may be required on loan guarantees.
(6)
The Administration shall take such steps as may be necessary to insure
that, in any fiscal year, at least 50 per centum of the amounts loaned or guaranteed pursuant to
this subsection are allotted to small business concerns located in urban areas identified by the
Administration as having high concentrations of unemployed or low- income individuals or to
small busine ss concerns owned by low-income individuals. The Administration shall define the

55

SMALL BUSINESS ACT

meaning of low- income as it applies to owners of small business concerns eligible to be assisted
under this subsection.
(7)
No financial assistance shall be extended pursuant to this subsection where
the Administration determines that the assistance will be used in relocating establishments from
one area to another if such relocation would result in an increase in unemployment in the area of
original location.
(j)
(1)
The Administration shall provide financial assistance to public or private
organizations to pay all or part of the cost of projects designed to provide technical or
management assistance to individuals or enterprises eligible for assistance under sections 7(i),
7(j)(10), and 8(a) of this Act, with special attention to small businesses located in areas of high
concentration of unemployed or low- income individuals, to small businesses eligible to receive
contracts pursuant to section 8(a) of this Act.
(2)
Financial assistance under this subsection may be provided for projects,
including, but not limited to—
(A)

planning and research, including feasibility studies and market

(B)

the identification and development of new business opportunities;

research;

(C)
The furnishing of centralized services with regard to public
services and Federal Government programs including programs authorized under sections 7(i),
7(j)(10), and 8(a) of this Act;
(D)
the establishment and strengthening of business service agencies,
including trade associations and cooperatives; and
(E)
the furnishing of business counseling, management training, and
legal and other related services, with special emphasis on the development of management
training programs using the resources of the business community, including the development of
management training opportunities in existing business, and with emphasis in all cases upon
providing management training of sufficient scope and duration to develop entrepreneurial and
managerial self-sufficiency on the part of the individuals served.
(3)
The Administration shall encourage the placement of subcontracts by
businesses with small business concerns located in areas of high concentration of unemployed or
low- income individuals, and with small businesses eligible to receive contracts pursuant to
section 8(a) of this Act. The Administration may provide incentives and assistance to such
businesses that will aid in the training and upgrading of potential subcontractors or other small
business concerns eligible for assistance under sections 7(i), 7(j), and 8(a) of this Act.
(A)

[Repealed].

56

SMALL BUSINESS ACT

(B)

[Repealed].

(4)
The Administration shall give preference to projects which promote the
ownership, participation in ownership, or mana gement of small businesses owned by
low- income individuals and small businesses eligible to receive contracts pursuant to section
8(a) of this Act.
(5)
The financial assistance authorized for projects under this subsection
includes assistance advanced by grant, agreement, or contract.
(6)
The Administration is authorized to make payments under grants and
contracts entered into under this subsection in lump sum or installments, and in advance or by
way of reimbursement, and in the case of grants, with necessary adjustments on account of
overpayments or underpayments.
(7)
To the extent feasible, services under this subsection shall be provided in a
location which is easily accessible to the individuals and small business concerns served.
(8)

[Repealed].

(9)
The Administration shall take such steps as may be necessary and
appropriate, in coordination and cooperation with the heads of other Federal departments and
agencies, to insure that contracts, subcontracts, and deposits made by the Federal Government or
with programs aided with Federal funds are placed in such way as to further the purposes of
sections 7(i), 7(j), and 8(a) of this Act.
(10) There is established within the Administration a small business and capital
ownership development program (hereinafter referred to as the "Program") which shall provide
assistance exclusively for small business concerns eligible to receive contracts pursuant to
section 8(a) of this Act. The program, and all other services and activities authorized under
section 7(j) and 8(a) of this Act, shall be managed by the Associate Administrator for Minority
Small Business and Capital Ownership Development under the supervision of, and responsible
to, the Administrator.
(A)

The program shall—

(i)
assist small business concerns participating in the Program
(either through public or private organizations) to develop and maintain comprehensive business
plans which set forth the Program Participant's specific business targets, objectives, and goals
developed and maintained in conformity with subparagraph (D).
(ii)
provide for such other nonfinancial services as deemed
necessary for the establishment, preservation, and growth of small business concerns
participating in the Program, including but not limited to (I) loan packaging, (II) financial
counseling, (III) accounting and bookkeeping assistance, (IV) marketing assistance, and (V)
management assistance;

57

SMALL BUSINESS ACT

(iii)
assist small business concerns participating in the Program
to obtain equity and debt financing;
(iv)
establish regular performance monitoring and reporting
systems for small business concerns participating in the Program to assure compliance with their
business plans;
(v)
analyze and report the causes of success and failure of
small business concerns participating in Program; and
(vi)
provide assistance necessary to help small business
concerns participating in the Program to procure surety bonds, with such assistance including,
but not limited to (I) the preparation of application forms required to receive a surety bond, (II)
special management and technical assistance designed to meet the specific needs of small
business concerns participating in the Program and which have received or are applying to
receive a surety bond, and (III) preparation of all forms necessary to receive a surety bond
guarantee from the Administration pursuant to title IV, part B of the Small Business Investment
Act of l958.
(B)
Small business concerns eligible to receive contracts pursuant to
section 8(a) of this Act shall participate in the Program.
(C)
(i)
A small business concern participating in any program or
activity conducted under the authority of this paragraph or eligible for the award of contracts
pursuant to section 8(a) on September 1, 1988, shall be permitted continued participation and
eligibility in such program or activity for a period of time which is the greater of—
(I)
9 years less the number of years since the award of
its first contract pursuant to section 8(a); or
(II)
its original fixed program participation term (plus
any extension thereof) assigned prior to the effective date of this paragraph plus eighteen
months.
(ii)
Nothing contained in this subparagraph shall be deemed to
prevent the Administration from instituting a termination or graduation pursuant to subparagraph
(F) or (H) for issues unrelated to the expiration of any time period limitation.
(D)
(i)
Promptly after certification under paragraph (11) a Program
Participant shall submit a business plan (hereinafter referred to as the "plan") as described in
clause (ii) of this subparagraph for review by the Business Opportunity Specialist assigned to
assist such Program Participant. The plan may be a revision of a preliminary business plan
submitted by the Program Participant or required by the Administration as a part of the
application for certification under this section and shall be designed to result in the Program
Participant eliminating the conditions or circumstances upon which the Administration

58

SMALL BUSINESS ACT

determined eligibility pursuant to section 8(a)(6). Such plan, and subsequent modifications
submitted under clause (iii) of this subparagraph, shall be approved by the business opportunity
specialist prior to the Program Participant being eligible for award of a contract pursuant to
section 8(a).
(ii)

The plans submitted under this subparagraph shall include

the following:
(I)
An analysis of market potential, competitive
environment, and other business analyses estimating the Program Partic ipant's prospects for
profitable operations during the term of program participation and after graduation.
(II)
An analysis of the Program Participant's strengths
and weaknesses with particular attention to correcting any financial, managerial, technical, or
personnel conditions which are likely to impede the small business concern from receiving
contracts other than those awarded under section 8(a).
(III) Specific targets, objectives, and goals, for the
business development of the Program Participant during the next and succeeding years utilizing
the results of the analyses conducted pursuant to subclauses (I) and (II).
(IV) A transition management plan outlining specific
steps to assure profitable business operations after graduation (to be incorporated into the
Program Participant's plan during the first year of the transitional stage of Program participation.
(V)
Estimates of contract awards pursuant to section
8(a) and from other sources, which the Program Participant will require to meet the specific
targets, objectives, and goals for the years covered by its plan. The estimates established shall be
consistent with the provisions of subparagraph (I) and section 8(a).
(iii)
Each Program Participant shall annually review its
currently approved plan with its Business Opportunity Specialist and modify such plan as may be
appropriate. Any modified plan shall be submitted to the Administration for approval. The
currently approved plan shall be considered valid until such time as a modified plan is approved
by the Business Opportunity Specialist. Annual reviews pertaining to years in the transitional
stage of program participation shall require, as appropriate, a written verification that such
Program Participant has complied with the requirements of subparagraph (I) relating to attaining
business activity from sources other that contracts awarded pursuant to section 8(a).
(iv)
Each Program Participant shall annually forecast its needs
for contract awards under section 8(a) fo r the next program year and the succeeding program
year during the review of its business plan, conducted pursuant to clause (iii). Such forecast
shall be known as the section 8(a) contract support level and shall be included in the Program
Participant's business plan. Such forecast shall include—

59

SMALL BUSINESS ACT

(I)
the aggregate dollar value of contract support to be
sought on a noncompetitive basis under section 8(a), reflecting compliance with the requirements
of subparagraph (I) relating to attaining business activity from sources other than contracts
awarded pursuant to section 8(a),
(II)
the types of contract opportunities being sought,
identified by Standard Industrial Classification (SIC) Code or otherwise,
(III)

an estimate of the dollar value of contract support to

be sought on a competitive basis, and
(IV) such other information as may be requested by the
Business Opportunity Specialist to provide effective business development assistance to the
Program Participant.
(E)
A small business concern participating in the program conducted
under the authority of this paragraph and eligible for the award of contracts pursuant to section
8(a) shall be denied all such assistance if such concern—
(i)

voluntarily elects not to continue participation;

(ii)

completes the period of Program participation as prescribed

by paragraph (15);
(iii)
is terminated pursuant to a termination proceeding
conducted in accordance with section 8(a)(9); or
(iv)
in accordance with section 8(a)(9).

is graduated pursuant to a graduation proceeding conducted

(F)
For purposes of this section and section 8(a), the term "terminated"
and the term "termination" means the total denial or suspension of assistance under this
paragraph or under section 8(a) prior to the graduation of the participating small business
concern or prior to the expiration of the maximum program participation term. An action for
termination shall be based upon good cause, including—
(i)

the failure by such concern to maintain its eligibility for

Program participation;
(ii)
the failure of the concern to engage in business practices
that will promote its competitiveness within a reasonable period of time as evidenced by, among
other indicators, a pattern of unjustified delinquent performance or terminations for default with
respect to contracts awarded under the authority of section 8(a);
(iii)
a demonstrated pattern of failing to make required
submissions or responses to the Administration in a timely manner;

60

SMALL BUSINESS ACT

(iv)
the willful violation of any rule or regulation of the
Administration pertaining to material issues;
(v)
the debarment of the concern or its disadvantaged owners
by any agency pursuant to subpart 9.4 of title 48, Code of Federal Regulations (or any successor
regulation); or
(vi)
the conviction of the disadvantaged owner or an officer of
the concern for any offense indicating a lack of business integrity including any conviction for
embezzlement, theft, forgery, bribery, falsification or violation of section 16. For purposes of
this clause, no termination action shall be taken with respect to a disadvantaged owner solely
because of the conviction of an officer of the concern (who is other than a disadvantaged owner)
unless such owner conspired with, abetted, or otherwise knowingly acquiesced in the activity or
omission that was the basis of such officer's conviction.
(G)
The Director of the Division may initiate a termination proceeding
by recommending such action to the Associate Administrator for Minority Small Business and
Capital Ownership Development. Whenever the Associate Administrator, or a designee of such
officer, determines such termination is appropriate, within 15 days after making such a
determination the Program Participant shall be provided a written notice of intent to terminate,
specifying the reasons for such action. No Program Participant shall be terminated from the
Program pursuant to subparagraph (F) without first being afforded an opportunity for a hearing
in accordance with section 8(a)(9).
(H)
For the purposes of sections 7(j) and 8(a) the term "graduated" or
"graduation" means that the Program Participant is recognized as successfully completing the
program by substantially achieving the targets, objectives, and goals contained in the concern's
business plan thereby demonstrating its ability to compete in the marketplace without assistance
under this section or section 8(a).
(I)
(i)
During the developmental stage of its participation in the
Program, a Program Participant shall take all reasonable efforts within its control to attain the
targets contained in its business plan for contracts awarded other than pursuant to section 8(a)
(hereinafter referred to as "business activity targets."). Such efforts shall be made a part of the
business plan and shall be sufficient in scope and duration to satisfy the Administration that the
Program Participant will engage [sic] a reasonable marketing strategy that will maximize its
potential to achieve its business activity targets.
(ii)
During the transitional stage of the Program a Program
Participant shall be subject to regulations regarding business activity targets that are promulgated
by the Administration pursuant to clause (iii).
(iii)

The regulations referred to in clause (ii) shall:

61

SMALL BUSINESS ACT

(I)
establish business activity targets applicable to
Program Participants during the fifth year and each succeeding year of Program Participation;
such targets, for such period of time, shall reflect a reasonably consistent increase in contracts
awarded other than pursuant to section 8(a), expressed as a percentage of total sales; when
promulgating business activity targets the Administration may establish modified targets for
Program Participants that have participated in the Program for a period of longer than four years
on the effective date of this subparagraph;
(II)

require a Program Participant to attain its business

activity targets;
(III) provide that, before the receipt of any contract to be
awarded pursuant to section 8(a), the Program Participant (if it is in the transitional stage) must
certify that it has complied with the regulations promulgated pursuant to subclause (II), or that it
is in compliance with such remedial measures as may have been ordered pursuant to regulations
issued under subclause (V);
(IV) require the Administration to review each Program
Participant's performance regarding attainment of business activity targets during periodic
reviews of such Participant's business plan; and
(V)
authorize the Administration to take appropriate
remedial measures with respect to a Program Participant that has failed to attain a required
business activity target for the purpose of reducing such Participant's dependence on contracts
awarded pursuant to section 8(a); such remedial actions may include, but are not limited to
assisting the Program Participant to expand the dollar volume of its competitive business activity
or limiting the dollar volume of contracts awarded to the Program Participant pursuant to section
8(a); except for actions that would constitute a termination, remedial measures taken pursuant to
this subclause shall not be reviewable pursuant to section 8(a)(9).
(J)
(i)
The Administration shall conduct an evaluation of a
Program Participant's eligibility for continued participation in the Program whenever it receives
specific and credible information alleging that such Program Participant no longer meets the
requirements for Program eligibility. Upon making a finding tha t a Program Participant is no
longer eligible, the Administration shall initiate a termination proceeding in accordance with
subparagraph (F). A Program Participant's eligibility for award of any contract under the
authority of section 8(a) may be suspended pursuant to subpart 9.4 of title 48, Code of Federal
Regulations (or any successor regulation).
(ii)
(I)
Except as authorized by subclause (II) or (III), no
award shall be made pursuant to section 8(a) to other than a small business concern.
(II)
In determining the size of a small business concern
owned by a socially and economically disadvantaged Indian tribe (or a wholly owned business
entity of such tribe), each firm's size shall be independently determined without regard to its
affiliation with the tribe, any entity of the tribal government, or any other business enterprise

62

SMALL BUSINESS ACT

owned by the tribe, unless the Administrator determines that one or more such tribally owned
business concerns have obtained, or are likely to obtain, a substantial unfa ir competitive
advantage within an industry category.
(III) Any joint venture established under the authority of
section 602(b) of Public Law 100-656, the "Business Opportunity Development Reform Act of
1988", shall be eligible for award of a contract pursuant to section 8(a).
(11) (A)
The Associate Administrator for Minority Small Business and
Capital Ownership Development shall be responsible for coordinating and formulating policies
relating to Federal Assistance to small business concerns eligible for assistance under section 7(i)
of this Act and small business concerns eligible to receive contracts pursuant to section 8(a) of
this Act.
(B)
(i)
Except as provided in clause (iii), no individual who was
determined pursuant to section 8(a) to be socially and economically disadvantaged before the
effective date of this subparagraph shall be permitted to assert such disadvantage with respect to
any other concern making application for certification after such effective date.
(ii)
Except as provided in clause (iii), any individual upon
whom eligibility is based pursuant to section 8(a)(4) shall be permitted to assert such eligibility
for only one small business concern.
(iii)
A socially and economically disadvantaged Indian tribe
may own more than one small business concern eligible for assistance pursuant to section
7(j)(10) and section 8(a) if—
(I)
the Indian tribe does not own another firm in the
same industry which has been determined to be eligible to receive contracts under this program,
and
(II)
the individuals responsible for the management and
daily operations of the concern do not manage more than two Program Participants.
(C)
No concern, previously eligible for the award of contracts pursuant
to section 8(a), shall be subsequently recertified for program participation if its prior
participation in the program was concluded for any of the reasons described in paragraph
(10)(E).
(D)
A concern eligible for the award of contracts pursuant to this
subsection shall remain eligible for such contracts if there is a transfer of ownership and control
(as defined pursuant to section 8(a)(4)) to individuals who are determined to be socially and
economically disadvantaged pursuant to section 8(a). In the event of such a transfer, the
concern, if not terminated or graduated, shall be eligible for a period of continued participation in
the program not to exceed the time limitations prescribed in paragraph (15).

63

SMALL BUSINESS ACT

(E)
There is established a Division of Program Certification and
Eligibility (hereinafter referred to in this paragraph as the "Division") that shall be made part of
the Office of Minority Small Business and Capital Ownership Development. The Division shall
be headed by a Director who shall report directly to the Associate Administrator for Minority
Small Business and Capital Ownership Development. The Division shall establish field offices
within such regional offices of the Administration as may be necessary to perform efficiently its
functions and responsibilities.
(F)
Subject to the provisions of section 8(a)(9), the functions and
responsibility of the Division are to—
(i)
receive, review and evaluate applications for certification
pursuant to paragraphs (4), (5), (6) and (7) of section 8(a);
(ii)
advise each program applicant within 15 days after the
receipt of an application as to whether such application is complete and suitable for evaluation
and, if not, what matters must be rectified;
(iii)
render recommendations on such applications to the
Associate Administrator for Minority Small Business and Capital Ownership Development;
(iv)
review and evaluate financial statements and other
submissions from concerns participating in the program established by paragraph (10) to
ascertain continued eligibility to receive subcontracts pursuant to section 8(a);
(v)
make a request for the initiation of termination or
graduation proceedings, as appropriate, to the Associate Administrator for Minority Small
Business and Capital Ownership Development;
(vi)
make recommendations to the Associate Administrator for
Minority Small Business and Capital Ownership Development concerning protests from
applicants that have been denied program admission;
(vii) decide protests regarding the status of a concern as a
disadvantaged concern for purposes of any program or activity conducted under the authority of
subsection (d) of section 8, or any other provision of Federal law that references such subsection
for a definition of program eligibility; and
(viii) implement such policy directives as may be issued by the
Associate Administrator for Minority Small Business and Capital Ownership Development
pursuant to subparagraph (I) regarding, among other things, the geographic distribution of
concerns to be admitted to the program and the industrial make-up of such concerns.
(G)
An applicant shall not be denied admission into the program
established by paragraph (10) due solely to a determination by the Division that specific contract
opportunities are unavailable to assist in the development of such concern unless—

64

SMALL BUSINESS ACT

(i)
the Government has not previously procured and is unlikely
to procure the types of products or services offered by the concern; or
(ii)
the purchases of such products or services by the Federal
Government will not be in quantities sufficient to support the developmental needs of the
applicant and other Program Participants providing the same or similar items or services.
(H)
Not later than 90 days after receipt of a completed application for
Program certification, the Associate Administrator for Minority Small Business and Capital
Ownership Development shall certify a small business concern as a Program Participant or shall
deny such application.
(I)
Thirty days before the conclusion of each fiscal year, the Director
of the Division shall review all concerns that have been admitted into the Program during the
preceding 12- month period. The review shall ascertain the number of entrants, their geographic
distribution and industrial classification. The Director shall also estimate the expected growth of
the Program during the next fiscal year and the number of additional Business Opportunity
Specialists, if any, that will be needed to meet the anticipated demand for the Program. The
findings and conclusions of the Director shall be reported to the Associate Administrator for
Minority Small Business and Capital Ownership Development by September 30 of each year.
Based on such report and such additional data as may be relevant, the Associate Administrator
shall, by October 31 of each year, issue policy and program directives applicable to such fiscal
year that—
(i)
establish priorities for the solicitation of program
applications from underrepresented regions and industry categories;
(ii)
assign staffing levels and allocate other program resources
as necessary to meet program needs; and
(iii)
establish priorities in the processing and admission of new
Program Participants as may be necessary to achieve an equitable geographic distribution of
concerns and a distribution of concerns across all industry categories in proportions needed to
increase significantly contract awards to small business concerns owned and controlled by
socially and economically disadvantaged individuals. When considering such increase the
Administration shall give due consideration to those industrial categories where Federal
purchases have been substantial but where the participation rate of such concerns has been
limited.
(12) (A)
The Administration shall segment the Capital Ownership
Development Program into two stages: a developmental stage; and a transitional stage.
(B)
The developmental stage of program participation shall be
designed to assist the concern in its effort to overcome its economic disadvantage by providing

65

SMALL BUSINESS ACT

such assistance as may be necessary and appropriate to access its markets and to strengthen its
financial and managerial skills.
(C)
The transitional stage of program participation shall be designed to
overcome, insofar as practicable, the remaining elements of economic disadvantage and to
prepare such concern for graduation from the program.
(13) A Program Participant, if otherwise eligible, shall be qualified to receive
the following assistance during the stages of program participation specified in paragraph 12:
(A)

Contract support pursuant to section 8(a).

(B)

Financial assistance pursuant to section 7(a)(20).

(C)
A maximum of two exemptions from the requirements of section
1(a) of the Act entitled "An Act providing conditions for the purchase of supplies and the making
of contracts by the United States, and for other purposes", approved June 30, 1936 (49 Stat.
2036), which exemptions shall apply only to contracts awarded pursuant to section 8(a) and shall
only be used to allow for contingent agreements by a small business concern to acquire the
machinery, equipment, facilities, or labor needed to perform such contracts. No exemption shall
be made pursuant to this subparagraph if the contract to which it pertains has an anticipated value
in excess of $10,000,000. This subparagraph shall cease to be effective on October 1, 1992.
(D)
A maximum of five exemptions from the requirements of the Act
entitled "An Act requiring contracts for the construction, alteration and repair of any public
building or public work of the United States to be accompanied by a performance bond
protecting the United States and by an additional bond for the protection of persons furnishing
material and labor for the construction, alteration, or repair of said public buildings or public
works", approved August 24, 1935 (49 Stat. 793), which exemptions shall apply only to
contracts awarded pursuant to section 8(a), except that, such exemptions may be granted under
this subparagraph only if—
(i)
the Administration finds that such concern is unable to
obtain the requisite bond or bonds from a surety and that no surety is willing to issue a bond
subject to the guarantee provision of title IV of the Small Business Investment Act of 1958 (15
U.S.C. 692 et seq.);
(ii)
the Administration and the agency providing the
contracting opportunity have provided for the protection of persons furnishing materials or labor
to the Program Participant by arranging for the direct disbursement of funds due to such persons
by the procuring agency or through any bank the deposits of which are insured by the Federal
Deposit Insurance Corporation; and
(iii)
the contract to which it pertains does not exceed
$3,000,000 in amount. This subparagraph shall cease to be effective on October 1, 1994.

66

SMALL BUSINESS ACT

(E)
Financial assistance whereby the Administration may purchase in
whole or in part, and on behalf of such concerns, skills training or upgrading for employees or
potential employees of such concerns. Such assistance may be made without regard to section
18(a). Assistance may be made by direct payment to the training provider or by reimbursing the
Program Participant or the Participant's employee, if such reimbursement is found to be
reasonable and appropriate. For purposes of this subparagraph the term "training provider" shall
mean an institution of higher education, a community or vocational college, or an institution
eligible to provide skills training or upgrading under the Job Training Partnership Act or title I of
the Workforce Investment Act of 1998. The Administration shall, in consultation with the
Secretary of Labor, promulgate rules and regulations to implement this subparagraph that
establish acceptable training and upgrading performance standards and provide for such
monitoring or audit requirements as may be necessary to ensure the integrity of the training
effort. No financial assistance shall be granted under the subparagraph unless the Administrator
determines that—
(i)
such concern has documented that it has first explored the
use of existing cost- free or cost-subsidized training programs offered by public and private sector
agencies working with programs of employment and training and economic development;
(ii)
no more than five employees or potential employees of
such concern are recipients of any benefits under this subparagraph at any one time;
(iii)
employee or potential employee;

no more than $2,500 shall be made available for any one

(iv)
the length of training or upgrading financed by this
subparagraph shall be no less than one month nor more than six months;
(v)
such concern has given adequate assurance it will employ
the trainee or upgraded employee for at least six months after the training or upgrading financed
by this subparagraph has been completed and each trainee or upgraded employee has provided a
similar assurance to remain within the employ of such concern for such period; if such concern,
trainee, or upgraded employee breaches this agreement, the Administration shall be entitled to
and shall make diligent efforts to obtain from the violating party the repayment of all funds
expended on behalf of the violating party, such repayment shall be made to the Administration
together with such interest and costs of collection as may be reasonable; the violating party shall
be barred from receiving any further assistance under this subparagraph;
(vi)
the training to be financed may take place either at such
concern's facilities or at those of the training provider; and
(vii) such concern will maintain such records as the
Administration deems appropriate to ensure that the provisions of this paragraph and any other
applicable law have not been violated.

67

SMALL BUSINESS ACT

(F)
The transfer of technology or surplus property owned by the
United States to such a concern. Activities designed to effect such transfer shall be developed in
cooperation with the heads of Federal agencies and shall include the transfer by grant, license, or
sale of such technology or property to such a concern. Such property may be transferred to
Program Participants on a priority basis. Technology or property transferred under this
subparagraph shall be used by the concern during the normal conduct of its business operation
and shall not be sold or transferred to any other party (other than the Government) during such
concern's term of participation in the Program and for one year thereafter.
(G)
Training assistance whereby the Administration shall conduct
training sessions to assist individuals and enterprises eligible to receive contracts under section
8(a) in the development of business principles and strategies to enhance their ability to
successfully compete for contracts in the marketplace.
(H)
Joint ventures, leader- follow arrangements, and teaming
agreements between the Program Participant and other Program Participants and other business
concerns with respect to contracting opportunities for the research, development, full- scale
engineering or production of major systems. Such activities shall be undertaken on the basis of
programs developed by the agency responsible for the procurement of the major system, with the
assistance of the Administration.
(I)

Transitional management business planning training and technical

assistance.
(J)
Program Participants in the developmental stage of Program
participation shall be eligible for the assistance provided by subparagraphs (A), (B), (C), (D),
(E), (F), and (G).
(14) Program Participants in the transitional stage of Program participation
shall be eligible for the assistance provided by subparagraphs (A), (B), (F), (G), (H), and (I) of
paragraph (13).
(15) Subject to the provisions of paragraph (10)(C), a small business concern
may receive developmental assistance under the Program and contracts under section 8(a) for a
total period of not longer than nine years, measured from the date of its certification under the
authority of such section, of which—
(A)
no more than four years may be spent in the developmental stage
of Program Participation; and
(B)

no more than five years may be spent in the transitional stage of

Program Participation.
(16) (A)
The Administrator shall develop and implement a process for the
systematic collection of data on the operations of the Program established pursuant to paragraph
(10).

68

SMALL BUSINESS ACT

(B)
Not later than April 30 of each year, the Administrator shall submit
a report to the Congress on the Program that shall include the following:
(i)
The average personal net worth of individuals who own
and control concerns that were initially certified for participation in the Program during the
immediately preceding fiscal year. The Administrator shall also indicate the dollar distribution
of net worths, at $50,000 increments, of all such individuals found to be socially and
economically disadvantaged. For the first report required pursuant to this paragraph the
Administrator shall also provide the data specified in the preceding sentence for all eligible
individuals in the Program as of the effective date of this paragraph.
(ii)
A description and estimate of the benefits and costs that
have accrued to the economy and the Government in the immediately preceding fiscal year due
to the operations of those business concerns that were performing contracts awarded pursuant to
section 8(a).
(iii)
A compilation and evaluation of those business concerns
that have exited the Program during the immediately preceding three fiscal years. Such
compilation and evaluation shall detail the number of concerns actively engaged in business
operations, those that have ceased or substantially curtailed such operations, including the
reasons for such actions, and those concerns that have been acquired by other firms or
organizations owned and controlled by other than socially and economically disadvantaged
individuals. For those businesses that have continued operations after they exited from the
Program, the Administrator shall also separately detail the benefits and costs that have accrued to
the economy during the immediately preceding fiscal year due to the operations of such
concerns.
(iv)
A listing of all participants in the Program during the
preceding fiscal year identifying, by State and by Region, for each firm: the name of the
concern, the race or ethnicity, and gender of the disadvantaged owners, the dollar value of all
contracts received in the preceding year, the dollar amount of advance payments received by
each concern pursuant to contracts awarded under section 8(a), and a description including (if
appropriate) an estimate of the dollar value of all benefits received pursuant to paragraphs (13)
and (14) and section 7(a)(20) during such year.
(v)
The total dollar value of contracts and options awarded
during the preceding fiscal year pursuant to section 8(a) and such amount expressed as a
percentage of total sales of (I) all firms participating in the Program during such year; and (II) of
firms in each of the nine years of program participation.
(vi)
A description of such additional resources or program
authorities as may be required to provide the types of services needed over the next two- year
period to service the expected portfolio of firms certified pursuant to section 8(a).

69

SMALL BUSINESS ACT

(vii) The total dollar value of contracts and options awarded
pursuant to section 8(a), at such dollar increments as the Administrator deems appropriate, for
each four digit standard industrial classification code under which such contracts and options
were classified.
(C)

The first report required by subparagraph (B) shall pertain to fiscal

year 1990.
(k)
In carrying out its functions under subsections 7(i), 7(j) and 8(a) of this Act, the
Administration is authorized—
(1)
to utilize, with their consent, the services and facilities of Federal agencies
without reimbursement, and, with the consent of any State or political subdivision of a State,
accept and utilize the services and facilities of such State or subdivision without reimbursement;
(2)
to accept, in the name of the Administration, and employ or dispose of in
furtherance of the purposes of this Act, any money or property, real, personal, or mixed, tangible,
or intangible, received by gift, devise, bequest, or otherwise;
(3)
to accept voluntary and uncompensated services, notwithstanding the
provisions of section 3679(b) of the Revised Statutes (31 U.S.C. 665(b)); and
(4)
to employ experts and consultants or organizations thereof as authorized
by section 15 of the Administrative Expenses Act of 1946 (5 U.S.C. 55a), except that no
individual may be employed under the authority of this subsection for more than one hundred
days in any fiscal year; to compensate individuals so employed at rates not in excess of the daily
equivalent of the highest rate payable under section 5332 of title 5, United States Code, including
traveltime; and to allow them, while away from their homes or regular places of business, travel
expenses (including per diem in lieu of subsistence) as authorized by section 5 of such Act (5
U.S.C. 73b-2) for persons in the Government service employed intermittently, while so
employed: Provided, however, that contracts for such employment may be renewed annually.
(l)

[RESERVED].

(m)

MICROLOAN PROGRAM
(1)

(A)

PURPOSES. The purposes of the Microloan Program are—

(i)
to assist women, low- income, veteran (within the meaning
of such term under section 3(q)), and minority entrepreneurs and business owners, and other such
individuals possessing the capability to operate successful business concerns; and
(ii)
to assist small business concerns in those areas suffering
from a lack of credit due to economic downturns;

70

SMALL BUSINESS ACT

(iii)
Small Business Administration--

to establish a microloan program to be administered by the

(I)
to make loans to eligible intermediaries to enable
such intermediaries to provide small- scale loans, particularly loans in amounts averaging not
more than $10,000, to startup, newly established, or growing small business concerns for
working capital or the acquisition of materials, supplies, or equipment;
(II)
to make grants to eligible intermediaries that,
together with non-Federal matching funds, will enable such intermediaries to provide intensive
marketing, management, and technical assistance to microloan borrowers;
(III) to make grants to eligible nonprofit entities that,
together with non-Federal matching funds, will enable such entities to provide intensive
marketing, management, and technical assistance to assist low- income entrepreneurs and other
low- income individuals obtain private sector financing for their businesses, with or without loan
guarantees; and
(IV) to report to the Committees on Small Business of
the Senate and the House of Representatives on the effectiveness of the microloan program and
the advisability and feasibility of implementing such a program; and
(iv)
to establish a welfare-to-work microloan initiative, which
shall be administered by the Administration, in order to test the feasibility of supplementing the
technical assistance grants provided under clauses (ii) and (iii) of subparagraph (B) to individuals
who are receiving assistance under the State program funded under part A of title IV of the
Social Security Act (42 U.S.C. 601 et seq.), or under any comparable State funded means tested
program of assistance for low- income individuals, in order to adequately assist those individuals
in—
(I)

establishing small businesses; and

(II)

eliminating their dependence on that assistance.

(B)
ESTABLISHMENT. There is established a microloan program,
under which the Administration may—
(i)
make direct loans to eligible intermediaries, as provided
under paragraph (3), for the purpose of making short-term, fixed interest rate microloans to
startup, newly established, and growing small business concerns under paragraph (6);
(ii)
in conjunction with such loans and subject to the
requirements of paragraph (4), make grants to such intermediaries for the purpose of providing
intensive marketing, management, and technical assistance to small business concerns that are
borrowers under this subsection; and

71

SMALL BUSINESS ACT

(iii)
subject to the requirements of paragraph (5), make grants to
nonprofit entities for the purpose of providing marketing, management, and technical assistance
to low- income individuals seeking to start or enlarge their own businesses, if such assistance
includes working with the grant recipient to secure loans in amounts not to exceed $35,000 from
private sector lending institutions, with or without a loan guarantee from the nonprofit entity.
(2)
ELIGIBILITY FOR PARTICIPATION.—An intermediary shall be
eligible to receive loans and grants under subparagraphs (B)(i) and (B)(ii) of paragraph (1) if it—
(A)

meets the definition in paragraph (10); and

(B)
has at least 1 year of experience making microloans to startup,
newly established, or growing small business concerns and providing, as an integral part of its
microloan program, intensive marketing, management, and technical assistance to its borrowers.
(3)

LOANS TO INTERMEDIARIES.—
(A)

INTERMEDIARY APPLICATIONS.

(i)
IN GENERAL.—As part of its application for a loan, each
intermediary shall submit a description to the Administration of—
(I)

the type of businesses to be assisted;

(II)

the size and range of loans to be made;

(III)

the geographic area to be served and its economic

and unemployment characteristics;
(IV) the status of small business concerns in the area to
be served and an analysis of their credit and technical assistance needs;
(V)
any marketing, management, and technical
assistance to be provided in connection with a loan made under this subsection;
(VI) the local economic credit markets, including the
costs associated with obtaining credit locally;
(VII) the qualifications of the applicant to carry out the
purpose of this subsection; and
(VIII) any plan to involve other technical assistance
providers (such as counselors from the Service Corps of Retired Executives or small business
development centers) or private sector lenders in assisting selected small business concerns.

72

SMALL BUSINESS ACT

(ii)
SELECTION OF INTERMEDIARIES.—In selecting
intermediaries to participate in the program established under this subsection, the Administration
shall give priority to those applicants that provide loans in amounts averaging not more than
$10,000.
(B)
INTERMEDIARY CONTRIBUTION.—As a condition of any
loan made to an intermediary under subparagraph (B)(i) of paragraph (1), the Administration
shall require the intermediary to contribute not less than 15 percent of the loan amount in cash
from non-Federal sources.
(C)
LOAN LIMITS.—Notwithstanding subsection (a)(3), no loan shall
be made under this subsection if the total amount outstanding and committed to one intermediary
(excluding outstanding grants) from the business loan and investment fund established by this
Act would, as a result of such loan, exceed $750,000 in the first year of such intermediary's
participation in the program, and $3,500,000 in the remaining years of the intermediary's
participation in the program.
(D)
(i)
IN GENERAL.—The Administrator shall, by regulation,
require each intermediary to establish a loan loss reserve fund, and to maintain such reserve fund
until all obligations owed to the Administration under this subsection are repaid.
(ii)

LEVEL OF LOAN LOSS RESERVE FUND.—

(I)
IN GENERAL.—Subject to subclause (III), the
Administrator shall require the loan loss reserve fund of an intermediary to be maintained at a
level equal to 15 percent of the outstanding balance of the notes receivable owed to the
intermediary.
(II)
REVIEW OF LOAN LOSS RESERVE.—After the
initial 5 years of an intermediary’s participation in the program authorized by this subsection, the
Administrator shall, at the request of the intermediary, conduct a review of the annual loss rate of
the intermediary. Any intermediary in operation under this subsection prior to October 1, 1994,
that requests a reduction in its loan loss reserve shall be reviewed based on the most recent 5year period preceding the request.
(III) REDUCTION OF LOAN LOSS RESERVE.—
Subject to the requirements of clause IV, the Administrator may reduce the annual loan loss
reserve requirement of an intermediary to reflect the actual average loan loss rate for the
intermediary during the preceding 5- year period, except that in no case shall the loan loss reserve
be reduced to less than 10 percent of the outstanding balance of the notes receivable owed to the
intermediary.
(IV) REQUIREMENTS.—The Administrator may
reduce the annual loan loss reserve requirement of an intermediary only if the intermediary
demonstrates to the satisfaction of the Administrator that—

73

SMALL BUSINESS ACT

(aa) the average annual loss rate for the
intermediary during the preceding 5- year period is less than 15 percent; and
(bb) that no other factors exist that may impair
the ability of the intermediary to repay all obligations owed to the Administration under this
subsection.
(E)
UNAVAILABILITY OF COMPARABLE CREDIT.—An
intermediary may make a loan under this subsection of more than $20,000 to a small business
concern only if such small business concern demonstrates that it is unable to obtain credit
elsewhere at comparable interest rates and that it has good prospects for success. In no case shall
an intermediary make a loan under this subsection of more than $35,000, or have outstanding or
committed to any 1 borrower more than $35,000.
(F)

LOAN DURATION; INTEREST RATES.—

(i)
LOAN DURATION.—Loans made by the Administration
under this subsection shall be for a term of 10 years.
(ii)
APPLICABLE INTEREST RATES.—Except as provided
in clause (iii), loans made by the Administration under this subsection to an intermediary shall
bear an interest rate equal to 1.25 percentage points below the rate determined by the Secretary
of the Treasury for obligations of the United States with a period of maturity of 5 years, adjusted
to the nearest one-eighth of 1 percent.
(iii)
RATES APPLICABLE TO CERTAIN SMALL
LOANS.—Loans made by the Administration to an intermediary that makes loans to small
business concerns and entrepreneurs averaging not more than $7,500, shall bear an interest rate
that is 2 percentage points below the rate determined by the Secretary of the Treasury for
obligations of the United States with a period of maturity of 5 years, adjusted to the nearest oneeighth of 1 percent.
(iv)
RATES APPLICABLE TO MULTIPLE SITES OR
OFFICES.—The interest rate prescribed in clause (ii) or (iii) shall apply to each separate
loanmaking site or office of 1 intermediary only if such site or office meets the requirements of
that clause.
(v)

RATE BASIS.—The applicable rate of interest under this

paragraph shall—
(I)
be applied retroactively fo r the first year of an
intermediary's participation in the program, based upon the actual lending practices of the
intermediary as determined by the Administration prior to the end of such year; and

74

SMALL BUSINESS ACT

(II)
be based in the second and subsequent years of an
intermediary's participation in the program, based upon the actual lending practices of the
intermediary during the term of the intermediary's participation in the program.
(vii)[sic] COVERED INTERMEDIARIES.—The interest rates
prescribed in this subparagraph shall apply to all loans made to intermediaries under this
subsection on or after October 28, 1991.
(G)
DELAYED PAYMENTS.—The Administration shall not require
repayment of interest or principal of a loan made to an intermediary under this subsection during
the first year of the loan.
(H)
FEES; COLLATERAL.—Except as provided in subparagraphs (B)
and (D), the Administration shall not charge any fees or require collateral other than an
assignment of the notes receivable of the microloans with respect to any loan made to an
intermediary under this subsection.
(4)
MARKETING, MANAGEMENT AND TECHNICAL ASSISTANCE
GRANTS TO INTERMEDIARIES.—Grants made in accordance with subparagraph (B)(ii) of
paragraph (1) shall be subject to the following requirements:
(A)
GRANT AMOUNTS.—Except as otherwise provided in
subparagraph (C) and subject to subparagraph (B), each intermediary that receives a loan under
subparagraph (B)(i) of paragraph (1) shall be eligible to receive a grant to provide marketing,
management, and technical assistance to small business concerns that are borrowers under this
subsection. Except as provided in subparagraph (C), each intermediary meeting the requirements
of subparagraph (B) may receive a grant of not more than 25 percent of the total outstanding
balance of loans made to it under this subsection.
(B)
CONTRIBUTION.—As a condition of any grant made under
subparagraph (A), except for a grant made to an intermediary that provides not less than 50
percent of its loans to small business concerns located in or owned by one or more residents of
an economically distressed area, the Administration shall require the intermediary to contribute
an amount equal to 25 percent of the amount of the grant, obtained solely from non-Federal
sources. In addition to cash or other direct funding, the contribution may include indirect costs
or in-kind contributions paid for under non-Federal programs.
(C)
ADDITIONAL TECHNICAL ASSISTANCE GRANTS FOR
MAKING CERTAIN LOANS.—
(i)
IN GEN ERAL.—In addition to grants made under
subparagraph (A), each intermediary shall be eligible to receive a grant equal to 5 percent of the
total outstanding balance of loans made to the intermediary under this subsection if—

75

SMALL BUSINESS ACT

(I)
the intermediary provides not less than 25 percent
of its loans to small business concerns located in or owned by one or more residents of an
economically distressed area; or
(II)
the intermediary has a portfolio of loans made under
this subsection that averages not more than $10,000 during the period of the intermediary's
participation.
(ii)
PURPOSES.—A grant awarded under clause (i) may be
used to provide marketing, management, and technical assistance to small business concerns that
are borrowers under this subsection.
(iii)
CONTRIBUTION EXCEPTION.—The contribution
requirements in subparagraph (B) do not apply to grants made under this subparagraph.
(D)
ELIGIBILITY FOR MULTIPLE SITES OR OFFICES.—The
eligibility for a grant described in subparagraph (A) or (C) shall be determined separately for
each loan- making site or office of 1 intermediary.
(E)

ASSISTANCE TO CERTAIN SMALL BUSINESS

CONCERNS.—
(i)
IN GENERAL.—Each intermediary may expend an
amount not to exceed 25 percent of the grant funds received under paragraph (1)(B)(ii) to
provide information and technical assistance to small business concerns that are prospective
borrowers under this subsection.
(ii)
TECHNICAL ASSISTANCE.—An intermediary may
expend not more than 25 percent of the funds received under paragraph (1)(B)(ii) to enter into
third party contracts for the provision of technical assistance.
(F)

SUPPLEMENTAL GRANT—

(i)
IN GENERAL.—The Administration may accept any
funds transferred to the Administration from other departme nts or agencies of the Federal
Government to make grants in accordance with this subparagraph and section 202(b) of the
Small Business Reauthorization Act of 1997 to participating intermediaries and technical
assistance providers under paragraph (5), for use in accordance with clause (iii) to provide
additional technical assistance and related services to recipients of assistance under a State
program described in paragraph (1)(A)(iv) at the time they initially apply for assistance under
this subparagraph.
(ii)
ELIGIBLE RECIPIENTS; GRANT AMOUNTS.—In
making grants under this subparagraph, the Administration may select, from among participating
intermediaries and technical assistance providers described in clause (i), not more than 20
grantees in fiscal year 1998, not more than 25 grantees in fiscal year 1999, and not more than 30

76

SMALL BUSINESS ACT

grantees in fiscal year 2000, each of whom may receive a grant under this subparagraph in an
amount not to exceed $200,000 per year.
(iii)

USE OF GRANT AMOUNTS.—Grants under this

subparagraph—
(I)
are in addition to other grants provided under this
subsection and shall not require the contribution of matching amounts as a condition of
eligibility; and
(II)

may be used by a grantee—

(aa) to pay or reimburse a portion of child care
and transportation costs of recipients of assistance described in clause (i), to the extent such costs
are not otherwise paid by State block grants under the Child Care Development Block Grant Act
of 1990 (42 U.S.C. 9958 et seq.); and
(bb) for marketing, management, and technical
assistance to recipients of assistance described in clause (i).
(iv)
MEMORANDUM OF UNDERSTANDING.—Prior to
accepting any transfer of funds under clause (i) from a department or agency of the Federal
Government, the Administration shall enter into a Memorandum of Understanding with the
department or agency, which shall—
(I)

specify the terms and conditions of the grants under

this subparagraph; and
(II)
provide for appropriate monitoring of expenditures
by each grantee under this subparagraph and each recipient of assistance described in clause (i)
who receives assistance from a grantee under this subparagraph, in order to ensure compliance
with this subparagraph by those grantees and recipients of assistance.
(5)
PRIVATE SECTOR BORROWING TECHNICAL ASSISTANCE
GRANTS. Grants made in accordance with subparagraph (B)(iii) of paragraph (1) shall be
subject to the following requirements:
(A)
GRANT AMOUNTS. Subject to the requirements of
subparagraph (B), the Administration may make not more than 55 grants annually, each in
amounts not to exceed $200,000 for the purposes specified in subparagraph (B)(iii) of paragraph
(1).
(B)
CONTRIBUTION. As a condition of any grant made under
subparagraph (A), the Administration shall require the grant recipient to contribute an amount
equal to 20 percent of the amount of the grant, obtained solely from non-Federal sources. In

77

SMALL BUSINESS ACT

addition to cash or other direct funding, the contribution may include indirect costs or in-kind
contributions paid for under non-Federal programs.
(6)
LOANS TO SMALL BUSINESS CONCERNS FROM ELIGIBLE
INTERMEDIARIES.—
(A)
IN GENERAL.—An eligible intermediary shall make short-term,
fixed rate loans to startup, newly established, and growing small business concerns from the
funds made available to it under subparagraph (B)(i) of paragraph (1) for working capital and the
acquisition of materials, supplies, furniture, fixtures, and equipment.
(B)
PORTFOLIO REQUIREMENT.—To the extent practicable, each
intermediary that operates a microloan program under this subsection shall maintain a microloan
portfolio with an average loan size of not more than $15,000.
(C)
INTEREST LIMIT.—Notwithstanding any provision of the laws
of any State or the constitution of any State pertaining to the rate or amount of interest that may
be charged, taken, received or reserved on a loan, the maximum rate of interest to be charged on
a microloan funded under this subsection shall not exceed the rate of interest applicable to a loan
made to an intermediary by the Administration—
(i)
in the case of a loan of more than $7,500 made by the
intermediary to a small business concern or entrepreneur by more than 7.75 percentage points;
and
(ii)
in the case of a loan of not more than $7,500 made by the
intermediary to a small business concern or entrepreneur by more than 8.5 percentage points.
(D)
REVIEW RESTRICTION.—The Administration shall not review
individual microloans made by intermediaries prior to approval.
(E)
ESTABLISHMENT OF CHILD CARE OR TRANSPORTATION
BUSINESS.—In addition to other eligible small businesses concerns [sic], borrowers under any
program under this subsection may include individuals who will use the loan proceeds to
establish for-profit or nonprofit child care establishments or business providing for-profit
transportation services.
(7)

PROGRAM FUNDING FOR MICROLOANS.—

(A)
NUMBER OF PARTICIPANTS.—Under the program authorized
by this subsection, the Administration may fund, on a competitive basis, not more than 300
intermediaries.
(B)

ALLOCATION.—

78

SMALL BUSINESS ACT

(i)
MINIMUM ALLOCATION.— Subject to the availability
of appropriations, of the total amount of new loan funds made available for award under this
subsection in each fiscal year, the Administration shall make available for award in each State
(including the district of Columbia, the Commonwealth of Puerto Rico, the United States Virgin
Islands, Guam, and American Samoa) an amount equal to the sum of—
(I)

the lesser of—
(aa)

$800,000; or

(bb) 1/55 of the total amount of new loan funds
made available for award under this subsection for that fiscal year; and
(II)

any additional amount, as determined by the

Administration.
(ii)
REDISTRIBUTION.—If, at the beginning of the third
quarter of a fiscal year, the Administration determines that any portion of the amount made
available to carry out this subsection is unlikely to be made available under clause (i) during that
fiscal year, the Administration may make that portion available for award in any one or more
States (including the District of Columbia, the Commonwealth of Puerto Rico, the United States
Virgin Islands, Guam, and American Samoa) without regard to clause (i).
(8)
EQUITABLE DISTRIBUTION OF INTERMEDIARIES.—In approving
microloan program applicants and providing funding to intermediaries under this subsection, the
Administration shall select and provide funding to such intermediaries as will ensure appropriate
availability of loans for small businesses in all industries located throughout each State,
particularly those located in urban and in rural areas.
(9)
GRANTS FOR MANAGEMENT, MARKETING, TECHNICAL
ASSISTANCE, AND RELATED SERVICES—
(A)
IN GENERAL.—The Administration may procure technical
assistance for intermediaries participating in the Microloan Program to ensure that such
intermediaries have the knowledge, skills, and understanding of microlending practice necessary
to operate successful microloan programs.
(B)
ASSISTANCE AMOUNT.—The Administration shall transfer 7
percent of its annual appropriation for loans and loan guarantees under this subsection to the
Administration's Salaries and Expense Account for the specific purpose of providing 1 or more
technical assistance grants to experienced microlending organizations and national and regional
nonprofit organizations that have demonstrated experience in providing training support for
microenterprise development and financing to achieve the purpose set forth in subparagraph (A).
(C)
WELFARE-TO-WORK.—Of amounts made available to carry out
the welfare-to-work microloan initiative under paragraph (1)(A)(iv) in any fiscal year, the

79

SMALL BUSINESS ACT

Administration may use not more than 5 percent to provide technical assistance, either directly or
through contractors, to welfare-to-work microloan initiative grantees, to ensure that, as grantees
they have the knowledge, skills, and understanding of microlending and welfare-to-work
transition, and other related issues, to operate a successful welfare-to-work microloan initiative.
(10) REPORT TO CONGRESS. On November 1, 1995, the Administration
shall submit to the Committees on Small Business of the Senate and the House of
Representatives a report, including the Administration's evaluation of the effectiveness of the
first 3 1/2 years of the microloan program and the following:
(A)

the numbers and locations of the intermediaries funded to conduct

(B)

the amounts of each loan and each grant to intermediaries;

(C)

a description of the matching contributions of each intermediary;

microloan programs;

(D)
the numbers and amounts of microloans made by the
intermediaries to small business concern borrowers;
(E)

the repayment history of each intermediary;

(F)
a description of the loan portfolio of each intermediary including
the extent to which it provides microloans to small business concerns in rural areas; and
(G)

any recommendations for legislative changes that would improve

program operations.
(11)

DEFINITIONS. For purposes of this subsection—
(A)

the term "intermediary" means
(i)

a private, nonprofit entity;

(ii)

a private nonprofit community development corporation;

(iii)
a consortium of private, nonprofit organizations or
nonprofit community development corporations;
(iv)
a quasi- governmental economic development entity (such
as a planning and development district), other than a State, county, municipal government, or any
agency thereof, if-(I)

no application is received from an eligible nonprofit

organization; or

80

SMALL BUSINESS ACT

(II)
the Administration determines that the needs of a
region or geographic area are not adequately served by an existing, eligible nonprofit
organization that has submitted an application; or
(v)
American Tribal Government,

an agency of or nonprofit entity established by a Native

that seeks to borrow or has borrowed funds from the Small Business Administration to make
microloans to small business concerns under this subsection;
(B)
the term "microloan" means a short-term, fixed rate loan of not
more than $35,000, made by an intermediary to a startup, newly established, or growing small
business concern;
(C)

the term "rural area" means any political subdivision or

unincorporated area-(i)
in a nonmetropolitan county (as defined by the Secretary of
Agriculture) or its equivalent thereof; or
(ii)
in a metropolitan county or its equivalent that has a resident
population of less than 20,000 if the Small Business Administration has determined such
political subdivision or area to be rural; and
(D)
the term "economically distressed area", as used in paragraph (4),
means a county or equivalent division of local government of a State in which the small business
concern is located, in which, according to the most recent data available from the Bureau of the
Census, Department of Commerce, not less than 40 percent of residents have an annual income
that is at or below the poverty level.
(12) DEFERRED PARTICIPATION LOAN PILOT.—In lieu of making direct
loans to intermediaries as authorized in paragraph (1)(B), during fiscal years 1998 through 2000,
the Administration may, on a pilot program basis, participate on a deferred basis of not less than
90 percent and not more than 100 percent on loans made to intermediaries by a for-profit or
nonprofit entity or by alliances of such entities, subject to the following conditions:
(A)
NUMBER OF LOANS.—In carrying out this paragraph, the
Administration shall not participate in providing financing on a deferred basis to more than 10
intermediaries in urban areas or more than 10 intermediaries in rural areas.
(B)
TERM OF LOANS.—The term of each loan shall be 10 years.
During the first year of the loan, the intermediary shall not be required to repay any interest or
principal. During the second through fifth years of the loan, the intermediary shall be required to
pay interest only. During the sixth through tenth years of the loan, the intermediary shall be
required to make interest payments and fully amortize the principal.

81

SMALL BUSINESS ACT

(C)
INTEREST RATE.—The interest rate on each loan shall be the
rate specified by paragraph (3)(F) for direct loans.
(13) EVALUATION OF WELFARE-TO-WORK MICROLOAN
INITIATIVE.—On January 31, 1999, and annually thereafter, the Administration shall submit to
the Committees on Small Business of the House of Representatives and the Senate a report on
any monies distributed pursuant to paragraph (4)(F).
(n)

REPAYMENT DEFERRED FOR ACTIVE DUTY RESERVISTS.—
(1)

DEFINITIONS.—In this subsection:

(A)
ELIGIBLE RESERVIST.—The term “eligible reservist” means a
member of a reserve component of the Armed Forces ordered to active duty during a period of
military conflict.
(B)
ESSENTIAL EMPLOYEE.—The term “essential employee”
means an individual who is employed by a small business concern and whose managerial or
technical expertise is critical to the successful day-to-day operations of that small business
concern.
(C)
military conflict” means—

PERIOD OF MILITARY CONFLICT.—The term “period of

(i)

a period of war declared by the Congress;

(ii)

a period of national emergency declared by the Congress or

by the President; or
(iii)
a period of a contingency operation, as defined in section
101(a) of title 10, United States Code.
(D)

QUALIFIED BORROWER.—The term “qualified borrower”

means—
(i)
an individual who is an eligible reservist and who received
a direct loan under subsection (a) or (b) before being ordered to active duty; or
(ii)
a small business concern that received a direct loan under
subsection (a) or (b) before an eligible reservist, who is an essential employee, was ordered to
active duty.
(2)

DEFERRAL OF DIRECT LOANS.—

82

SMALL BUSINESS ACT

(A)
IN GENERAL.—The Administration shall, upon written request,
defer repayment of principal and interest due on a direct loan made under subsection (a) or (b), if
such loan was incurred by a qualified borrower.
(B)
PERIOD OF DEFERRAL.—The period of deferral for repayment
under this paragraph shall begin on the date on which the eligible reservist is ordered to active
duty and shall terminate on the date that is 180 days after the date such eligible reservist is
discharged or released from active duty.
(C)
INTEREST RATE REDUCTION DURING DEFERRAL.—
Notwithstanding any other provision of law, during the period of deferral described in
subparagraph (B), the Administration may, in its discretion, reduce the interest rate on any loan
qualifying for a deferral under this paragraph.
(3)
DEFERRAL OF LOAN GUARANTEES AND OTHER
FINANCINGS.—The Administration shall—
(A)
encourage intermediaries participating in the program under
subsection (m) to defer repayment of a loan made with proceeds made available under that
subsection, if such loan was incurred by a small business concern that is eligible to apply for
assistance under subsection (b)(3); and
(B)
not later than 30 days after the date of the enactment of this
subsection, establish guidelines to—
(i)
encourage lenders and other intermediaries to defer
repayment of, or provide other relief relating to, loan guarantees under subsection (a) and
financings under section 504 of the Small Business Investment Act of 1958 that were incurred by
small business concerns that are eligible to apply for assistance under subsection (b)(3), and loan
guarantees provided under subsection (m) if the intermediary provides relief to a small business
concern under this paragraph; and
(ii)
implement a program to provide for the deferral of
repayment or other relief to any intermediary providing relief to a small business borrower under
this paragraph.
§ 8.
(a)
(1)
It shall be the duty of the Administration and it is hereby empowered,
whenever it determines such action is necessary or appropriate—
(A)
to enter into contracts with the United States Government and any
department, agency, or officer thereof having procurement powers obligating the Administration
to furnish articles, equipment, supplies, services, or materials to the Government or to perform
construction work for the Government. In any case in which the Administration certifies to any
officer of the Government having procurement powers that the Administration is competent and
responsible to perform any specific Government procurement contract to be let by any such
officer, such officer shall be authorized in his discretion to let such procurement contract to the

83

SMALL BUSINESS ACT

Administration upon such terms and conditions as may be agreed upon between the
Administration and the procurement officer. Whenever the Administration and suc h procurement
officer fail to agree, the matter shall be submitted for determination to the Secretary or the head
of the appropriate department or agency by the Administrator. Not later than 5 days from the
date the Administration is notified of a procurement officer's adverse decision, the
Administration may notify the contracting officer of the intent to appeal such adverse decision,
and within 15 days of such date the Administrator shall file a written request for a
reconsideration of the adverse decision with the Secretary of the department or agency head. For
the purposes of this subparagraph, a procurement officer's adverse decision includes a decision
not to make available for award pursuant to this subsection a particular procurement requirement
or the failure to agree on the terms and conditions of a contract to be awarded noncompetitively
under the authority of this subsection. Upon receipt of the notice of intent to appeal, the
Secretary of the department or the agency head shall suspend further action regarding the
procurement until a written decision on the Administrator's request for reconsideration has been
issued by such Secretary or agency head, unless such officer makes a written determination that
urgent and compelling circumstances which significantly affect interests of the United States will
not permit waiting for a reconsideration of the adverse decision. If the Administrator's request
for reconsideration is denied, the Secretary of the department or agency head shall specify the
reasons why the selected firm was determined to be incapable to perform the procurement
requirement, and the findings supporting such determination, which shall be made a part of the
contract file for the requirement. A contract may not be awarded under this subsection if the
award of the contract would result in a cost to the awarding agency which exceeds a fair market
price;
(B)
to arrange for the performance of such procurement contracts by
negotiating or otherwise letting subcontracts to socially and economically disadvantaged small
business concerns for construction work, services, or the manufacture, supply, assembly of such
articles, equipment, supplies, materials, or parts thereof, or servicing or processing in connection
therewith, or such manageme nt services as may be necessary to enable the Administration to
perform such contracts;
(C)
to make an award to a small business concern owned and
controlled by socially and economically disadvantaged individuals which has completed its
period of Program Participation as prescribed by section 7(j)(15), if—
(i)
the contract will be awarded as a result of an offer
(including price) submitted in response to a published solicitation relating to a competition
conducted pursuant to subparagraph (D); and
(ii)
the prospective contract awardee was a Program Participant
eligible for award of the contract on the date specified for receipt of offers contained in the
contract solicitation; and
(D)
(i)
A contract opportunity offered for award pursuant to this
subsection shall be awarded on the basis of competition restricted to eligible Program
Participants if—

84

SMALL BUSINESS ACT

(I)
there is a reasonable expectation that at least two
eligible Program Participants will submit offers and that award can be made at a fair market
price, and
(II)
the anticipated award price of the contract
(including options) will exceed $5,000,000 in the case of a contract opportunity assigned a
standard industrial classification code for manufacturing and $3,000,000 (including optio ns) in
the case of all other contract opportunities.
(ii)
The Associate Administrator for Minority Small Business
and Capital Ownership Development, on a nondelegable basis, is authorized to approve a request
from an agency to award a contract opportunity under this subsection on the basis of a
competition restricted to eligible Program Participants even if the anticipated award price is not
expected to exceed the dollar amounts specified in clause (i)(II). Such approvals shall be granted
only on a limited basis.
(2)
Notwithstanding subsections (a) and (c) of the first section of the Act
entitled "An Act requiring contracts for the construction, alteration, and repair of any public
building or public work of the United States to be accompanied by a performance bond
protecting the United States and by additional bond for the protection of persons furnishing
material and labor for the construction, alteration, or repair of said public buildings or public
works," approved August 24, 1935 (49 Stat. 793), no small business concern shall be required to
provide any amount of any bond as a condition of receiving any subcontract under this
subsection if the Administrator determines that such amount is inappropriate for such concern in
performing such contract: Provided, That the Administrator shall exercise the authority granted
by the paragraph only if—
(A)
the Administration takes such measures as it deems appropriate for
the protection of persons furnishing materials and labor to a small business receiving any benefit
pursuant to this paragraph;
(B)
the Administration assists, insofar as practicable, a small business
receiving the benefits of this paragraph to develop, within a reasonable period of time, such
financial and other capability as may be needed to obtain such bonds as the Administration may
subsequently require for the successful completion of any program conducted under the authority
of this subsection;
(C)
the Administration finds that such small business is unable to
obtain the requisite bond or bonds from a surety and that no surety is willing to issue such bond
or bonds subject to the guarantee provisions of Title IV of the Small Business Investment Act of
1958; and
(D)
the small business is determined to be a startup concern and such
concern has not been participating in any program conducted under the authority of this
subsection for a period exceeding one year.

85

SMALL BUSINESS ACT

The authority to waive bonds provided in this paragraph (2) may not be exercised after
September 30, 1988.
(3)
(A)
Any Program Participant selected by the Administration to perform
a contract to be let noncompetitively pursuant to this subsection shall, when practicable,
participate in any negotiation of the terms and conditions of such contract.
(B)
(i)
For purposes of paragraph (1) a "fair market price" shall be
determined by the agency offering the procurement requirement to the Administration, in
accordance with clauses (ii) and (iii).
(ii)
The estimate of a current fair market price for a new
procureme nt requirement, or a requirement that does not have a satisfactory procurement history,
shall be derived from a price or cost analysis. Such analysis may take into account prevailing
market conditions, commercial prices for similar products or services, or data obtained from any
other agency. Such analysis shall consider such cost or pricing data as may be timely submitted
by the Administration.
(iii)
The estimate of a current fair market price for a
procurement requirement that has a satisfactory procurement history shall be based on recent
award prices adjusted to insure comparability. Such adjustments shall take into account
differences in quantities, performance times, plans, specifications, transportation costs,
packaging and packing costs, labor and materials costs, overhead costs, and any other additional
costs which may be deemed appropriate.
(C)
An agency offering a procurement requirement for potential award
pursuant to this subsection shall, upon the request of the Administration, promptly submit to the
Administration a written statement detailing the method used by the agency to estimate the
current fair market price for such contract, identifying the information, studies, analyses, and
other data used by such agency. The agency's estimate of the current fair market price (and any
supporting data furnished to the Administration) shall not be disclosed to any potential offeror
(other than the Administration).
(D)
A small business concern selected by the Administration to
perform or negotiate a contract to be let pursuant to this subsection may request the
Administration to protect the agency's estimate of the fair market price for such contract pursuant
to paragraph (1)(A).
(4)
(A)
For purposes of this section, the term "socially and economically
disadvantaged small business concern" means any small business concern which meets the
requirements of subparagraph (B) and—
(i)

which is at least 51 per centum unconditionally owned

by—

86

SMALL BUSINESS ACT

(I)

one or more socially and economically

disadvantaged individuals,
(II)
an economically disadvantaged Indian tribe (or a
wholly owned business entity of such tribe), or
(III)

an economically disadvantaged Native Hawaiian

organization, or
(ii)
in the case of any publicly owned business, at least 51 per
centum of the stock of which is unconditionally owned by—
(I)

one or more socially and economically

disadvantaged individuals,
(II)
an economically disadvantaged Indian tribe (or a
wholly owned business entity of such tribe), or
(III)

an economically disadvantaged Native Hawaiian

organization.
(B)
A small business concern meets the requirements of this
subparagraph if the management and daily business operations of such small concern are
controlled by one or more—
(i)
socially and economically disadvantaged individuals
described in subparagraph (A)(i)(I) or subparagraph (A)(ii)(I), or
(ii)
members of an economically disadvantaged Indian tribe
described in subparagraph (A)(i)(II) or subparagraph (A)(ii)(II) or
(iii)
Native Hawaiian organizations described in subparagraph
(A)(i)(III) or subparagraph (A)(ii)(III).
(C)
Each Program Participant shall certify, on an annual basis, that it
meets the requirements of this paragraph regarding ownership and control.
(5)
Socially disadvantaged individuals are those who have been subjected to
racial or ethnic prejudice or cultural bias because of their identity as a member of a group
without regard to their individual qualities.
(6)
(A)
Economically disadvantaged individuals are those socially
disadvantaged individuals whose ability to compete in the free enterprise system has been
impaired due to diminished capital and credit opportunities as compared to others in the same
business area who are not socially disadvantaged. In determining the degree of diminished credit
and capital opportunities the Administration shall consider, but not be limited to, the assets and

87

SMALL BUSINESS ACT

net worth of such socially disadvantaged individual. In determining the economic disadva ntage
of an Indian tribe, the Administration shall consider, where available, information such as the
following: the per capita income of members of the tribe excluding judgment awards, the
percentage of the local Indian population below the poverty level, and the tribe's access to capital
markets.
(B)

Each Program Participant shall annually submit to the

Administration—
(i)

a personal financial statement for each disadvantaged

owner;
(ii)
a record of all payments made by the Program Participant
to each of its disadvantaged owners or to any person or entity affiliated with such owners; and
(iii)
such other information as the Administration may deem
necessary to make the determinations required by this paragraph.
(C)
(i)
Whenever, on the basis of information provided by a
Program Participant pursuant to subparagraph (B) or otherwise, the Administration has reason to
believe that the standards to establish economic disadvantage pursuant to subparagraph (A) have
not been met, the Administration shall conduct a review to determine whether such Program
Participant and its disadvantaged owners continue to be impaired in their ability to compete in
the free enterprise system due to diminished capital and credit opportunities when compared to
other concerns in the same business area, which are not socially disadvantaged.
(ii)
If the Administration determines, pursuant to such review,
that a Program Participant and its disadvantaged owners are no longer economically
disadvantaged for the purpose of receiving assistance under this subsection, the Program
Participant shall be graduated pursuant to section 7(j)(10)(G) subject to the right to a hearing as
provided for under paragraph (9).
(D)
(i)
Whenever, on the basis of information provided by a
Program Participant pursuant to subparagraph (B) or otherwise, the Administration has reason to
believe that the amount of funds or other assets withdrawn from a Program Participant for the
personal benefit of its disadvantaged owners or any person or entity affiliated with such owners
may have been unduly excessive, the Administration shall conduct a review to determine
whether such withdrawal of funds or other assets was detrimental to the achievement of the
targets, objectives, and goals contained in such Program Participant's business plan.
(ii)
If the Administration determines, pursuant to such review,
that funds or other assets have been withdrawn to the detriment of the Program Participant's
business, the Administration shall—

88

SMALL BUSINESS ACT

(I)
initiate a proceeding to terminate the Program
Participant pursuant to section 7(j)(10)(F), subject to the right to a hearing under paragraph (9);
or
(II)
require an appropriate reinvestment of funds or
other assets and such other steps as the Administration may deem necessary to ensure the
protection of the concern.
(E)
Whenever the Administration computes personal net worth for any
purpose under this paragraph, it shall exclude from such computation—
(i)
the value of investments that disadvant aged owners have in
their concerns, except that such value shall be taken into account under this paragraph when
comparing such concerns to other concerns in the same business area that are owned by other
than socially disadvantaged persons;
(ii)
the equity that disadvantaged owners have in their primary
personal residences, except that any portion of such equity that is attributable to unduly
excessive withdrawals from a Program Participant or a concern applying for program
participation shall be taken into account.
(7)
(A)
No small business concern shall be deemed eligible for any
assistance pursuant to this subsection unless the Administration determines that with contract,
financial, technical, and management support the small business concern will be able to perform
contracts which may be awarded to such concern under paragraph (1)(C) and has reasonable
prospects for success in competing in the private sector.
(B)
Limitations established by the Administration in its regulations and
procedures restricting the award of contracts pursuant to this subsection to a limited number of
standard industrial classification codes in an approved business plan shall not be applied in a
manner that inhibits the logical business progression by a participating small business concern
into areas of industrial endeavor where such concern has the potential for success.
(8)
All determinations made pursuant to paragraph (5) with respect to whether
a group has been subjected to prejudice or bias shall be made by the Administrator after
consultation with the Associate Administrator for Minority Small Business and Capital
Ownership Development. All other determinations made pursuant to paragraphs (4), (5), (6),
and (7) shall be made by the Associate Administrator for Minority Small Business and Capital
Ownership Development under the supervision of, and responsible to, the Administrator.
(9)
(A)
Subject to the provisions of subparagraph (E), the Administration,
prior to taking any action described in subparagraph (B), shall provide the small business
concern that is the subject of such action, an opportunity for a hearing on the record, in
accordance with chapter 5 of title 5, United States Code.
(B)

The actions referred to in subparagraph (A) are—

89

SMALL BUSINESS ACT

(i)
denial of program admission based upon a negative
determination pursuant to paragraph (4), (5), or (6);
(ii)

a termination pursuant to section 7(j)(10)(F);

(iii)

a graduation pursuant to section 7(j)(10)(G); and

(iv)

the denial of a request to is sue a waiver pursuant to

paragraph (21)(B).
(C)
The Administration's proposed action, in any proceeding
conducted under the authority of this paragraph, shall be sustained unless it is found to be
arbitrary, capricious, or contrary to law.
(D)
A decision rendered pursuant to this paragraph shall be the final
decision of the Administration and shall be binding upon the Administration and those within its
employ.
(E)
The adjudicator selected to preside over a proceeding conducted
under the authority of this paragraph shall decline to accept jurisdiction over any matter that—
(i)
does not, on its face, allege facts that, if proven to be true,
would warrant reversal or modification of the Administration's position;
(ii)
(iii)
governing such proceedings; or

is untimely filed;
is not filed in accordance with the rules of procedure

(iv)
has been decided by or is the subject of an adjudication
before a court of competent jurisdiction over such matters.
(F)
Proceedings conducted pur suant to the authority of this paragraph
shall be completed and a decision rendered, insofar as practicable, within ninety days after a
petition for a hearing is filed with the adjudicating office.
(10) The Administration shall develop and implement an outreach program to
inform and recruit small business concerns to apply for eligibility for assistance under this
subsection. Such program shall make a sustained and substantial effort to solicit applications for
certification from small business concerns located in areas of concentrated unemployment or
underemployment or within labor surplus areas and within States having relatively few Program
Participants and from small disadvantaged business concerns in industry categories that have not
substantially participated in the award of contracts let under the authority of this subsection.

90

SMALL BUSINESS ACT

(11) To the maximum extent practicable, construction subcontracts awarded by
the Administration pursuant to this subsection shall be awarded within the county or State where
the work is to be performed.
(12) (A)
The Administration shall require each concern eligible to receive
subcontracts pursuant to this subsection to annually prepare and submit to the Administration a
capability statement. Such statement shall briefly describe such concern's various contract
performance capabilities and shall contain the name and telephone number of the Business
Opportunity Specialist assigned such concern. The Administration shall separate such
statements by those primarily dependent upon local contract support and those primarily
requiring a national marketing effort. Statements primarily dependent upon local contract
support shall be disseminated to appropriate buying activities in the marketing area of the
concern. The remaining statements shall be disseminated to the Directors of Small and
Disadvantaged Business Utilization for the appropriate agencies who shall further distribute such
statements to buying activities with such agencies that may purchase the types of items or
services described on the capability statements.
(B)
Contracting activities receiving capability statements shall, within
60 days after receipt, contact the relevant Business Opportunity Specialist to indicate the
number, type and approximate dollar value of contract opportunities that such activities may be
awarding over the succeeding 12-month period and which may be appropriate to consider for
award to those concerns for which it has received capability statements.
(C)
Each executive agency reporting to the Federal Procurement Data
System contract actions with an aggregate value in excess of $50,000,000 in fiscal year 1988, or
in any succeeding fiscal year, shall prepare a forecast of expected contract opportunities or
classes of contract opportunities for the next and succeeding fiscal years that small business
concerns, including those owned and controlled by socially and economically disadvantaged
individuals, are capable of performing. Such forecast shall be periodically revised during such
year. To the extent such information is available, the agency forecasts shall specify:
(i)
The approximate number of individual contract
opportunities (and the number of opportunities within a class)
(ii)
The approximate dollar value, or range of dollar values, for
each contract opportunity or class of contract opportunities.
(iii)
issuance of a procurement request.
(iv)

The anticipated time (by fiscal year quarter) for the

The activity responsible for the award and administration of

the contract.
(D)
The head of each executive agency subject to the provisions of
subparagraph (C) shall within 10 days of completion furnish such forecasts to—

91

SMALL BUSINESS ACT

(i)
the Director of the Office of Small and Disadvantaged
Business Utilization established pursuant to section 15(k) for such agency; and
(ii)

the Administrator.

(E)
The information reported pursuant to subparagraph (D) may be
limited to classes of items and services for which there are substantial annual purchases.
(F)

Such forecasts shall be available to small business concerns.

(13) For purposes of this subsection, the term "Indian tribe" means any Indian
tribe, band, nation, or other organized group or community of Indians, including any Alaska
Native village or regional or village corporation (within the meaning of the Alaska Native
Claims Settlement Act) which—
(A)
is recognized as eligible for the special programs and services
provided by the United States to Indians because of their status as Indians, or
(B)
is recognized as such by the State in which such tribe, band,
nation, group, or community resides.
(14) (A)
A concern may not be awarded a contract under this subsection as
a small business concern unless the concern agrees that—
(i)
in the case of a contract for services (except construction),
at least 50 percent of the cost of contract performance incurred for personnel shall be expended
for employees of the concern; and
(ii)
in the case of a contract for procurement of supplies (other
than procurement from a regular dealer in such supplies), the concern will perform work for at
least 50 percent of the cost of manufacturing the supplies (not including the cost of materials).
(B)
The Administrator may change the percentage under clause (i) or
(ii) of subparagraph (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. A percentage established under the preceding
sentence may not differ from a percentage established under section 15(o).
(C)
The Administration shall establish, through public rulemaking,
requirements similar to those specified in subparagraph (A) 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 subparagraph. The percentage applicable to any such
requirement shall be determined in accordance with subparagraph (B), except that such a
percentage may not differ from a percentage established under section 15(o) for the same
industry category.

92

SMALL BUSINESS ACT

(15) For purposes of this subsection, the term "Native Hawaiian Organization"
means any community service organization serving Native Hawaiians in the State of Hawaii
which—
(A)
is a nonprofit corporation that has filed articles of incorporation
with the director (or the designee thereof) of the Hawaii Department of Commerce and
Consumer Affairs, or any successor agency,
(B)

is controlled by Native Hawaiians, and

(C)

whose business activities will principally benefit such Native

Hawaiians.
(16) (A)
The Administration shall award sole source contracts under this
section to any small business concern recommended by the procuring agency offering the
contract opportunity if—
(i)
the Program Participant is determined to be a responsible
contractor with respect to performance of such contract opportunity;
(ii)
the award of such contract would be consistent with the
Program Participant’s business plan; and
(iii)
the award of the contract would not result in the Program
Participant exceeding the requirements established by section 7(j)(10)(I).
(B)
To the maximum extent practicable, the Administration shall
promote the equitable geographic distribution of sole source contracts awarded pursuant to this
subsection.
(17) (A)
An otherwise responsible business concern that is in compliance
with the requirements of subparagraph (B) shall not be denied the opportunity to submit and
have considered its offer for any procurement contract for the supply of a product to be let
pursuant to this subsection or subsection (a) of section 15 solely because such concern is other
than the actual manufacturer or processor of the product to be supplied under the contract.
(B)
To be in compliance with the requirements referred to in
subparagraph (A), such a business concern shall—
(i)

be primarily engaged in the wholesale or retail trade;

(ii)
be a small business concern under the numerical size
standard for the Standard Industrial Classification Code assigned to the contract solicitation on
which the offer is being made;

93

SMALL BUSINESS ACT

(iii)
be a regular dealer, as defined pursuant to section 35(a) of
title 41, United States Code (popularly referred to as the Walsh-Healey Public Contracts Act), in
the product to be offered the Government or be specifically exempted from such section by
section 7(j)(13)(C); and
(iv)
represent that it will supply the product of a domestic small
business manufacturer or processor, unless a waiver of such requirement is granted—
(I)
by the Administrator, after reviewing a
determination by the 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 of an offeror by the solicitation; or
(II)
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.
(18) (A)
No person within the employ of the Administration shall, during
the term of such employment and for a period of two years after such employment has been
terminated, engage in any activity or transaction specified in subparagraph (B) with respect to
any Program Participant during such person's term of employment, if such person participated
personally (either directly or indirectly) in decision- making responsibilities relating to such
Program Participant or with respect to the administration of any assistance provided to Program
Participants generally under this subsection, section 7(j)(10), or section 7(a)(20).
(B)

The activities and transactions prohibited by subparagraph (A)

include—
(i)
the buying, selling, or receiving (except by inheritance) of
any legal or beneficial ownership of stock or any other ownership interest or the right to acquire
any such interest;
(ii)
the entering into or execution of any written or oral
agreement (whether or not legally enforceable) to purchase or otherwise obtain any right or
interest described in clause (i); or
(iii)

the receipt of any other benefit or right that may be an

incident of ownership.
(C)
(i)
The employees designated in clause (ii) shall annually
submit a written certification to the Administration regarding compliance with the requirements
of this paragraph.
(ii)

The employees referred to in clause (i) are—
(I)

regional administrators;

94

SMALL BUSINESS ACT

(II)

district directors;

(III) the Associate Administrator for Minority Small
Business and Capital Ownership Development;
(IV) employees whose principal duties relate to the
award of contracts or the provision of other assistance pursuant to this subsection or section
7(j)(10); and
(V)

such other employees as the Administrator may

deem appropriate.
(iii)
Any present or former employee of the Administration who
violates this paragraph shall be subject to a civil penalty, assessed by the Attorney General, that
shall not exceed 300 per centum of the maximum amount of gain such employee realized or
could have realized as a result of engaging in those activities and transactions prescribed by
subparagraph (B).
(iv)
In addition to any other remedy or sanction provided for
under law or regulation, any person who falsely certifies pursuant to clause (i) shall be subject to
a civil penalty under the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801-3812).
(19) (A)
Any employee of the Administration who has authority to take,
direct others to take, recommend, or approve any action with respect to any program or activity
conducted pursuant to this subsection or section 7(j), shall not, with respect to any such action,
exercise or threaten to exercise such authority on the basis of the political activity or affiliation of
any party. Employees of the Administration shall expeditiously report to the Inspector General
of the Administration any such action for which such employee's participation has been solicited
or directed.
(B)
Any employee who willfully and knowingly violates subparagraph
(A) shall be subject to disciplinary action which may consist of separation from service,
reduction in grade, suspension, or reprimand.
(C)
Subparagraph (A) shall not apply to any action taken as a penalty
or other enforcement of a violation of any law, rule, or regulation prohibiting or restricting
political activity.
(D)
The prohibitions of subparagraph (A), and remedial measures
provided for under subparagraphs (B) and (C) with regard to such prohibitions, shall be in
addition to, and not in lieu of, any other prohibitions, measures or liabilities that may arise under
any other provision of law.

95

SMALL BUSINESS ACT

(20) (A)
Small business concerns participating in the Program under section
7(j)(10) and eligible to receive contracts pursuant to this section shall semiannually report to
their assigned Business Opportunity Specialist the following:
(i)
A listing of any agents, representatives, attorneys,
accountants, consultants, and other parties (other than employees) receiving compensation to
assist in obtaining a Federal contract for such Program Participant.
(ii)
The amount of compensation received by any person listed
under clause (i) during the relevant reporting period and a description of the activities performed
in return for such compensation.
(B)
The Business Opportunity Specialist shall promptly review and
forward such report to the Associate Administrator for Minority Small Business and Capital
Ownership Development. Any report that raises a suspicion of improper activity shall be
reported immediately to the Inspector General of the Administration.
(C)
The failure to submit a report pursuant to the requirements of this
subsection and applicable regulations shall be considered "good cause" for the initiation of a
termination proceeding pursuant to section 7(j)(10)(F).
(21) (A)
Subject to the provisions of subparagraph (B), a contract (including
options) awarded pursuant to this subsection shall be performed by the concern that initially
received such contract. Notwithstanding the provisions of the preceding sentence, if the owner
or owners upon whom eligibility was based relinquish ownership or control of such concern, or
enter into any agreement to relinquish such ownership or control, such contract or option shall be
terminated for the convenience of the Government, except that no repurchase costs or other
damages may be assessed against such concerns due solely to the provisions of this
subparagraph.
(B)
The Administrator may, on a nondelegable basis, waive the
requirements of subparagraph (A) only if one of the following conditions exist:
(i)
When it is necessary for the owners of the concern to
surrender partial control of such concern on a temporary basis in order to obtain equity financing.
(ii)
The head of the contracting agency for which the contract
is being performed certifies that termination of the contract would severely impair attainment of
the agency's program objectives or missions;
(iii)
Ownership and control of the concern that is performing
the contract will pass to another small business concern that is a program participant, but only if
the acquiring firm would otherwise be eligible to receive the award directly pursuant to
subsection (a);

96

SMALL BUSINESS ACT

(iv)
The individuals upon whom eligibility was based are no
longer able to exercise control of the concern due to incapacity or death; or
(v)
When, in order to raise equity capital, it is necessary for the
disadvantaged owners of the concern to relinquish ownership of a majority of the voting stock of
such concern, but only if—
(I)

such concern has exited the Capital Ownership

Development Program;
(II)
the disadvantaged owners will maintain ownership
of the largest single outstanding block of voting stock (including stock held by affiliated parties);
and
(III)

the disadvantaged owners will maintain control of

daily business operations.
(C)

The Administrator may waive the requirements of subparagraph

(A) if—
(i)
in the case of subparagraph (B)(i), (ii) and (iv), he is
requested to do so prior to the actual relinquishment of ownership or control; and
(ii)
in the case of subparagraph (B)(iii), he is requested to do so
as soon as possible after the incapacity or death occurs.
(D)
Concerns performing contracts awarded pursuant to this subsection
shall be required to notify the Administration immediately upon entering an agreement (either
oral or in writing) to transfer all or part of its stock or other ownership interest to any other party.
(E)
Notwithstanding any other provision of law, for the purposes of
determining ownership and control of a concern under this section, any potential ownership
interests held by investment companies licensed under the Small Business Investment Act of
1958 shall be treated in the same manner as interests held by the individuals upon whom
eligibility is based.
(b)
It shall also be the duty of the Administration and it is hereby empowered,
whenever it determines such action is necessary—
(1)
(A)
business concerns—

to provide technical, managerial, and informational aids to small

(i)
by advising and counseling on matters in connection with
Government procurement and policies, principles, and practices of good management;
(ii)

by cooperating and advising with—

97

SMALL BUSINESS ACT

(I)
voluntary business, professional, educational, and
other nonprofit organizations, associations, and institutions (except that the Administration shall
take such actions as it determines necessary to ensure that such cooperation does not constitute
or imply an endorsement by the Administration of the organization or its products or services,
and shall ensure that it receives appropriate recognition in all printed materials); and
(II)

other Federal and State agencies;

(iii)
by maintaining a clearinghouse for information on
managing, financing, and operating small business enterprises; and
(iv)
by disseminating such information, including through
recognition events, and by other activities that the Administration determines to be appropriate.
(B)
To establish, conduct, and publicize, and to recruit, select, and
train volunteers for (and to enter into contracts, grants, or cooperative agreements therefor),
volunteer programs, including a Service Corps of Retired Executives (SCORE) and an Active
Corps of Executive (sic) (ACE) for the purposes of section 8(b)(1)(A) of this Act. To facilitate
the implementation of such volunteer programs the Administration shall maintain at its
headquarters and pay the salaries, benefits, and expenses of a volunteer and professional staff to
manage and oversee the program. Any such payments made pursuant to this subparagraph shall
be effective only to such extent or in such amounts as are provided in advance in appropriation
Acts. Notwithstanding any other provision of law, SCORE may solicit cash and in-kind
contributions from the private sector to be used to carry out its functions under this Act, and may
use payments made by the Administration pursuant to this subparagraph for such solicitation and
the management of the contributions received.
(C)
To allow any individual or group of persons participating with it in
furtherance of the purposes of subparagraphs (A) and (B) to use the Administration's office
facilities and related material and services as the Administration deems appropriate, including
clerical and stenographic services:
(i)
such volunteers, while carrying out activities under section
8(b)(1) of this Act shall be deemed Federal employees for the purposes of the Federal tort claims
provisions in title 28, United States Code; and for the purposes of subchapter I of chapter 81 of
title 5, United States Code (relative to compensation to Federal employees for work injuries)
shall be deemed civil employees of the United States within the meaning of the term "employee"
as defined in section 8101 of title 5, United States Code, and the provisions of that subchapter
shall apply except that in computing compensation benefits for disability or death, the monthly
pay of a volunteer shall be deemed that received under the entrance salary for a grade GS-11
employee;
(ii)
the Administrator is authorized to reimburse such
volunteers for all necessary out-of-pocket expenses incident to their provision of services under
this Act, or in connection with attendance at meetings sponsored by the Administration, or for

98

SMALL BUSINESS ACT

the cost of malpractice insurance, as the Administrator shall determine, in accordance with
regulations which he or she shall prescribe, and, while they are carrying out such activities away
from their homes or regular places of business, for travel expenses (including per diem in lieu of
subsistence) as authorized by section 5703 of title 5, United States Code, for individuals serving
without pay; and
(iii)
such volunteers shall in no way provide services to a client
of such Administration with a delinquent loan outstanding, except upon a specific request signed
by such client for assistance in connection with such matter.
(D)
Notwithstanding any other provision of law, no payment for
supportive services or reimbursement of out-of-pocket expenses made to persons serving
pursuant to section 8(b)(1) of this Act shall be subject to any tax or charge or be treated as wages
or compensation for the purposes of unemployment, disability, retirement, public assistance, or
similar benefit payments, or minimum wage laws.
(E)
In carrying out its functions under subparagraph (A), to make
grants (including contracts and cooperative agreements) to any public or private institution of
higher education for the establishment and operation of a small business institute, which shall be
used to provide business counseling and assistance to small business concerns through the
activities of students enrolled at the institution, which students shall be entitled to receive
educational credits for their activities.
(F)
Notwithstanding any other provision of law and pursuant to
regulations which the Administrator shall prescribe, counsel may be employed and counsel fees,
court costs, bail, and other expenses incidental to the defense of volunteers may be paid in
judicial or administrative proceedings arising directly out of the performance of activities
pursuant to section 8(b)(1) of this Act, as amended (15 U.S.C. 637(b)(1)) to which volunteers
have been made parties.
(G)
In carrying out its functions under this Act and to carry out the
activities authorized by title IV of the Women's Business Ownership Act of 1988 the
Administration is authorized to accept, in the name of the Administration, and employ or dispose
of in furtherance of the purposes of this Act, any money or property, real, personal, or mixed,
tangible, or intangible, received by gift, devise, bequest, or otherwise; and, further, to accept
gratuitous services and facilities.
(2)
to make a complete inventory of all productive facilities of small-business
concerns or to arrange for such inventory to be made by any other governmental agency which
has the facilities. In making any such inventory, the appropriate agencies in the several States
may be requested to furnish an inventory of the productive facilities of small-business concerns
in each respective State if such an inventory is available or in prospect;
(3)
to coordinate and to ascertain the means by which the productive capacity
of small-business concerns can be more effectively utilized;

99

SMALL BUSINESS ACT

(4)
to consult and cooperate with officers of the Government having
procurement or property disposal powers, in order to utilize the potential productive capacity of
plants operated by small-business concerns;
(5)
to obtain information as to methods and practices which Government
prime contractors utilize in letting subcontracts and to take action to encourage the letting of
subcontracts by prime contractors to small-business concerns at prices and on conditions and
terms which are fair and equitable;
(6)
to determine within any industry the concerns, firms, persons,
corporations, partnerships, cooperatives, or other business enterprises which are to be designated
"small business concerns" for the purpose of effectuating the provisions of this Act. To carry out
this purpose the Administrator, when requested to do so, shall issue in response to each such
request an appropriate certificate certifying an individual concern as a "small business concern"
in accordance with criteria expressed in this Act. Any such certificate shall be subject to
revocation when the concern covered thereby ceases to be a "small business concern". Offices of
the Government having procurement or lending powers, or engaging in the disposal of Federal
property or allocating materials or supplies, or promulgating regulations affecting the distribution
of materials or supplies, shall accept as conclusive the Administration's determination as to
which enterprises are to be designated "small-business concerns," as authorized and directed
under this paragraph;
(7)
(A)
to certify to Government procurement officers, and officers
engaged in the sale and disposal of Federal property, with respect to all elements of
responsibility, including, but not limited to, capability, competency, capacity, credit, integrity,
perseverance, and tenacity, of any small business concern or group of such concerns to receive
and perform a specific Government contract. A Government procurement officer or an officer
engaged in the sale and disposal of Federal property may not, for any reason specified in the
preceding sentence, preclude any small business concern or group of such concerns from being
awarded such contract without referring the matter for a final disposition to the Administration.
(B)
If a Government procurement officer finds that an otherwise
qualified small business concern may be ineligible due to the provisions of section 35(a) of title
41, United States Code (the Walsh-Healey Public Contracts Act), he shall notify the
Administration in writing of such finding. The Administration shall review such finding and
shall either dismiss it and certify the small business concern to be an eligible Government
contractor for a specific Government contract or if it concurs in the finding, forward the matter to
the Secretary of Labor for final disposition, in which case the Administratio n may certify the
small business concern only if the Secretary of Labor finds the small business concern not to be
in violation.
(C)
In any case in which a small business concern or group of such
concerns has been certified by the Administration pursua nt to (A) or (B) to be a responsible or
eligible Government contractor as to a specific Government contract, the officers of the
Government having procurement or property disposal powers are directed to accept such
certification as conclusive, and shall let such Government contract to such concern or group of

100

SMALL BUSINESS ACT

concerns without requiring it to meet any other requirement of responsibility or eligibility.
Notwithstanding the first sentence of this subparagraph, the Administration may not establish an
exemption from referral or notification or refuse to accept a referral or notification from a
Government procurement officer made pursuant to subparagraph (A) or (B) of this paragraph,
but nothing in this paragraph shall require the processing of an application for certification if the
small business concern to which the referral pertains declines to have the application processed.
(8)
to obtain from any Federal department, establishment, or agency engaged
in procurement or in the financing of procurement or production such reports concerning the
letting of contracts and subcontracts and the making of loans to business concerns as it may
deem pertinent in carrying out its functions under this Act;
(9)
to obtain from any Federal department, establishment, or age ncy engaged
in the disposal of Federal property such reports concerning the solicitation of bids, time of sale,
or otherwise as it may deem pertinent in carrying out its functions under this Act;
(10) to obtain from suppliers of materials information pertaining to the method
of filling orders and the bases for allocating their supply, whenever it appears that any small
business is unable to obtain materials from its normal sources;
(11) to make studies and recommendations to the appropriate Federal agencies
to insure that a fair proportion of the total purchases and contracts for property and services for
the Government be placed with small-business enterprises, to insure that a fair proportion of
Government contracts for research and development be placed with small-business concerns, to
insure that a fair proportion of the total sales of Government property be made to small-business
concerns, and to insure a fair and equitable share of materials, supplies, and equipment to
small-business concerns;
(12) to consult and cooperate with all Government agencies for the purpose of
insuring that small-business concerns shall receive fair and reasonable treatment from such
agencies;
(13) to establish such advisory boards and committees as may be necessary to
achieve the purposes of this Act and of the Small Business Investment Act of 1958; to call
meetings of such boards and committees from time to time; to pay the transportation expenses
and a per diem allowance in accordance with Section 5703 of title 5, United States Code, to the
members of such boards and committees for travel and subsistence expenses incurred at the
request of the Administration in connection with travel to points more than fifty miles distant
from the homes of such members in attending the meetings of such boards and committees; and
to rent temporarily, within the District of Columbia or elsewhere, such hotel or other
accommodations as are needed to facilitate the conduct of such meetings;
(14) to provide at the earliest practicable time such information and assistance
as may be appropriate, including information concerning eligibility for loans under section
7(b)(3), to local public agencies (as defined in section 110(h) of the Housing Act of 1949) and to

101

SMALL BUSINESS ACT

small-business concerns to be displaced by federally aided urban renewal projects in order to
assist such small-business concerns in reestablishing their operations;
(15) to disseminate, without regard to the provisions of section 3204 of title 39,
United States Code, data and information, in such form as it shall deem appropriate, to public
agencies, private organizations, and the general public;
(16) to make studies of matters materially affecting the competitive strength of
small business, and of the effect on small business of Federal laws, programs, and regulations,
and to make recommendations to the appropriate Federal agency or agencies for the adjustment
of such programs and regulations to the needs of small business; and
(17) to make grants to, and enter into contracts and cooperative agreements
with, educational institutions, private businesses, veterans’ nonprofit community-based
organizations, and Federal, State, and local departments and agencies for the establishment and
implementation of outreach programs for disabled veterans (as defined in section 4211(3) of title
38, United States Code), veterans, and members of a reserve component of the Armed Forces.
(c)

[Reserved].

(d)
(1)
It is the policy of the United States that small business concerns, small
business concerns owned and controlled by veterans, small business concerns owned and
controlled by service-disabled veterans, qualified HUBZone small business concerns, small
business concerns owned and controlled by socially and economically disadvantaged individuals
and small business concerns owned and controlled by women, shall have the maximum
practicable opportunity to participate in the performance of contracts let by any Federal agency,
including contracts and subcontracts for subsystems, assemblies, components, and related
services for major systems. It is further the policy of the United States that its prime contractors
establish procedures to ensure the timely payment of amounts due pursuant to the terms of their
subcontracts with small business concerns, small business concerns owned and controlled by
veterans, small business concerns owned and controlled by service-disabled veterans, qualified
HUBZone small business concerns, small business concerns owned and controlled by socially
and economically disadvantaged individuals, and small business concerns owned and controlled
by women.
(2)
The clause stated in paragraph (3) shall be included in all contracts let by
any Federal agency except any contract which—
(A)

does not exceed the simplified acquisition threshold;

(B)
including all subcontracts under such contracts will be performed
entirely outside of any State, territory, or possession of the United States, the District of
Columbia, or the Commonwealth of Puerto Rico; or
(C)

is for services which are personal in nature.

102

SMALL BUSINESS ACT

(3)

The clause required by paragraph (2) shall be as follows:

"(A) It is the policy of the United States that small business concerns,
small business concerns owned and controlled by veterans, small business concerns owned and
controlled by service-disabled veterans, qualified HUBZone small business concerns, small
business concerns owned and controlled by socially and economically disadvantaged individuals,
and small business concerns owned and controlled by women shall have the maximum
practicable opportunity to participate in the performance of contracts let by any Federal agency,
including contracts and subcontracts for subsystems, assemblies, components, and related
services for major systems. It is further the policy of the United States that its prime contractors
establish procedures to ensure the timely payment of amounts due pursuant to the terms of their
subcontracts with small business concerns, small business concerns owned and controlled by
veterans, small business concerns owned and controlled by service-disabled veterans, qualified
HUBZone small business concerns, small business concerns owned and controlled by socially
and economically disadvantaged individuals, and small business concerns owned and controlled
by women.
"(B) The contractor hereby agrees to carry out this policy in the awarding
of subcontracts to the fullest extent consistent with the efficient performance of this contract.
The contractor further agrees to cooperate in any studies or surveys as may be conducted by the
United States Small Business Administration or the awarding agency of the United States as may
be necessary to determine the extent of the contractor's compliance with this clause.
"(C) As used in this contract, the term 'small business concern' shall mean
a small business as defined pursuant to section 3 of the Small Business Act and relevant
regulations promulgated pursuant thereto. The term 'small business concern owned and
controlled by socially and economically disadvantaged individuals' shall mean a small business
concern—
"(i) which is at least 51 per centum owned by one or more socially
and economically disadvantaged individuals; or, in the case of any publicly owned business, at
least 51 per centum of the stock of which is owned by one or more socially and economically
disadvantaged individuals; and
"(ii) whose management and daily business operations are
controlled by one or more of such individuals.
"The contractor shall presume that socially and economically
disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans,
Asian Pacific Americans, and other minorities, or any other individual found to be disadvantaged
by the Administration pursuant to section 8(a) of the Small Business Act.
“(D) The term "small business concern owned and controlled by women"
shall mean a small business concern—

103

SMALL BUSINESS ACT

(i)
which is at least 51 per centum owned by one or more
women; or, in the case of any publicly owned business, at least 51 per centum of the stock of
which is owned by one or more women; and
(ii)
controlled by one or more women.

whose management and daily business operations are

“(E) The term “small business concern owned and controlled by
veterans” sha ll mean a small business concern-—
(i)
which is at least 51 per centum owned by one or more
eligible veterans; or, in the case of any publicly owned business, at least 51 per centum of the
stock of which is owned by one or more veterans; and
(ii)
whose management and daily business operations are
controlled by such veterans. The contractor shall treat as veterans all individuals who are
veterans within the meaning of the term under section 3(q) of the Small Business Act.
"(F) Contractors acting in good faith may rely on written
representations by their subcontractors regarding their status as either a small business concern,
small business concerns owned and controlled by veterans, small business concerns owned and
controlled by service-disabled veterans, a small business concern owned and controlled by
socially and economically disadvantaged individuals, or a small business concern owned and
controlled by women."
“(G) In this contract, the term ‘qualified HUBZone small business
concern’ has the meaning given that term in section 3(p) of the Small Business Act.”
(4)
(A)
Each solicitation of an offer for a contract to be let by a Federal
agency which is to be awarded pursuant to the negotiated method of procurement and which may
exceed $1,000,000, in the case of a contract for the construction of any public facility, or
$500,000, in the case of all other contracts, shall contain a clause notifying potential offering
companies of the provisions of this subsection relating to contracts awarded pursuant to the
negotiated method of procurement.
(B)
Before the award of any contract to be let, or any amendment or
modification to any contract let, by any Federal agency which—
(i)

is to be awarded, or was let, pursuant to the negotiated

(ii)

is required to include the clause stated in paragraph (3),

method of procurement;

(iii)
may exceed $1,000,000 in the case of a contract for the
construction of any public facility, or $500,000 in the case of all other contracts, and

104

SMALL BUSINESS ACT

(iv)

which offers subcontracting possibilities,

the apparent successful offeror shall negotiate with the procurement authority a subcontracting
plan which incorporates the information prescribed in paragraph (6). The subcontracting plan
shall be included in and made a material part of the contract.
(C)
If, within the time limit prescribed in regulations of the Federal
agency concerned, the apparent successful offeror fails to negotiate the subcontracting plan
required by this paragraph, such offeror shall become ineligible to be awarded the contract. Prior
compliance of the offeror with other such subcontracting plans shall be considered by the Federal
agency in determining the responsibility of that offeror for the award of the contract.
(D)
No contract shall be awarded to any offeror unless the procurement
authority determines that the plan to be negotiated by the offeror pursuant to this paragraph
provides the maximum practicable opportunity for small business concerns, qualified HUBZone
small business concerns, small business concerns owned and controlled by veterans, small
business concerns owned and controlled by service-disabled veterans, small business concerns
owned and controlled by socially and economically disadvantaged individuals, and small
business concerns owned and controlled by women to participate in the performance of the
contract.
(E)
Notwithstanding any other provision of law, every Federal agency,
in order to encourage subcontracting opportunities for small business concerns, small business
concerns owned and controlled by veterans, small business concerns owned and controlled by
service-disabled veterans, qualified HUBZone small business concerns, and small business
concerns owned and controlled by the socially and economically disadvantaged individuals as
defined in paragraph (3) of this subsection and for small business concerns owned and controlled
by women, is hereby authorized to provide such incentives as such Federal agency may deem
appropriate in order to encourage such subcontracting opportunities as may be commensurate
with the efficient and economical performance of the contract: Provided, That, this
subparagraph shall apply only to contracts let pursuant to the negotiated method of procurement.
(F)
(i)
Each contract subject to the requirements of this paragraph
or paragraph (5) shall contain a clause for the payment of liquidated damages upon a finding that
a prime contractor has failed to make a good faith effort to comply with the requirements
imposed on such contractor by this subsection.
(ii)
The contractor shall be afforded an opportunity to
demonstrate a good faith effort regarding compliance prior to the contracting officer's final
decision regarding the imposition of damages and the amount thereof. The final decision of a
contracting officer regarding the contractor's obligation to pay such damages, or the amounts
thereof, shall be subject to the Contract Disputes Act of 1978 (41 U.S.C. 601-613).
(iii)
Each agency shall ensure that the goals offered by the
apparent successful bidder or offeror are attainable in relation to—

105

SMALL BUSINESS ACT

(I)
the subcontracting opportunities available to the
contractor, commensurate with the efficient and economical performance of the contract;
(II)
the pool of eligible subcontractors available to
fulfill the subcontracting opportunities; and
(III) the actual performance of such contractor in
fulfilling the subcontracting goals specified in prior plans.
(G)
The following factors shall be designated by the Federal agency as
significant factors for purposes of evaluating offers for a bundled contract where the head of the
agency determines that the contract offers a significant opportunity for subcontracting:
(i)
A factor that is based on the rate provided under the
subcontracting plan for small business participation in the performance of the contract.
(ii)
For the evaluation of past performance of an offeror, a
factor that is based on the extent to which the offeror attained applicable goals for small business
participation in the performance of contracts.
(5)
(A)
Each solicitation of a bid for any contract to be let, or any
amendment or modification to any contract let, by any Federal agency which—
(i)

is to be awarded pursuant to the formal advertising method

(ii)

is required to contain the clause stated in paragraph (3) of

of procurement,

this subsection,
(iii)
may exceed $1,000,000 in the case of a contract for the
construction of any public facility, or $500,000, in the case of all other contracts, and
(iv)

offers subcontracting possibilities,

shall contain a clause requiring any bidder who is selected to be awarded a contract to submit to
the Federal agency concerned a subcontracting plan which incorporates the information
prescribed in paragraph (6).
(B)
If, within the time limit prescribed in regulations of the Federal
agency concerned, the bidder selected to be awarded the contract fails to submit the
subcontracting plan required by this paragraph, such bidder sha ll become ineligible to be
awarded the contract. Prior compliance of the bidder with other such subcontracting plans shall
be considered by the Federal agency in determining the responsibility of such bidder for the
award of the contract. The subcontracting plan of the bidder awarded the contract shall be
included in and made a material part of the contract.

106

SMALL BUSINESS ACT

(6)

Each subcontracting plan required under paragraph (4) or (5) shall

include—
(A)
percentage goals for the utilization as subcontractors of small
business concerns, small business concerns owned and controlled by veterans, small business
concerns owned and controlled by service-disabled veterans, qualified HUBZone small business
concerns, small business concerns owned and controlled by socially and economically
disadvantaged individuals, and small business concerns owned and controlled by women;
(B)
the name of an individual within the employ of the offeror or
bidder who will administer the subcontracting program of the offeror or bidder and a description
of the duties of such individual;
(C)
a description of the efforts the offeror or bidder will take to assure
that small business concerns, small business concerns owned and controlled by veterans, small
business concerns owned and controlled by service-disabled veterans, qualified HUBZone small
business concerns, small business concerns owned and controlled by the socially and
economically disadvantaged individuals, and small business concerns owned and controlled by
women will have an equitable opportunity to compete for subcontracts;
(D)
assurances that the offeror or bidder will include the clause
required by paragraph (2) of this subsection in all subcontracts which offer further
subcontracting opportunities, and that the offeror or bidder will require all subcontractors (except
small business concerns) who receive subcontracts in excess of $1,000,000 in the case of a
contract for the construction of any public facility, or in excess of $500,000 in the case of all
other contracts, to adopt a plan similar to the plan required under paragraph (4) or (5);
(E)
assurances that the offeror or bidder will submit such periodic
reports and cooperate in any studies or surveys as may be required by the Federal agency or the
Administration in order to determine the extent of compliance by the offeror or bidder with the
subcontracting plan; and
(F)
a recitation of the types of records the successful offeror or bidder
will maintain to demonstrate procedures which have been adopted to comply with the
requirements and goals set forth in this plan, including the establishment of source lists of small
business concerns, small business concerns owned and controlled by veterans, small business
concerns owned and controlled by service-disabled veterans, qualified HUBZone small business
concerns, small business concerns owned and controlled by socially and economically
disadvantaged individuals, and small business concerns owned and controlled by women; and
efforts to identify and award subcontracts to such small business concerns.
(7)
The provisions of paragraph (4), (5), and (6) shall not apply to offerors or
bidders who are small business concerns.
(8)

The failure of any contractor or subcontractor to comply in good faith

with—

107

SMALL BUSINESS ACT

(A)

the clause contained in paragraph (3) of this subsection, or

(B)
any plan required of such contractor pursuant to the authority of
this subsection to be included in its contract or subcontract,
shall be a material breach of such contract or subcontract.
(9)
Nothing contained in this subsection shall be construed to supersede the
requirements of Defense Manpower Policy Number 4A (32A CFR Chap. 1) or any successor
policy.
(10) In the case of contracts within the provisions of paragraphs (4), (5), and
(6), the Administration is authorized to—
(A)
assist Federal agencies and businesses in complying with their
responsibilities under the provisions of this subsection, including the formulation of
subcontracting plans pursuant to paragraph (4);
(B)
review any solicitation for any contract to be let pursuant to
paragraphs (4) and (5) to determine the maximum practicable opportunity for small business
concerns, small business concerns owned and controlled by veterans, small business concerns
owned and controlled by service-disabled veterans, qualified HUBZone small business concerns,
small business concerns owned and controlled by socially and economically disadvantaged
individuals, and small business concerns owned and controlled by women to participate as
subcontractors in the performance of any contract resulting from any solicitation, and to submit
its findings, which shall be advisory in nature, to the appropriate Federal agency; and
(C)
evaluate compliance with subcontracting plans, either on a
contract-by-contract basis, or in the case contractors [sic] having multiple contracts, on an
aggregate basis.
(11) For purposes of determining the attainment of a subcontract utilization
goal under any subcontracting plan entered into with any executive agency pursuant to this
subsection, a mentor firm providing development assistance to a protégé firm under the pilot
Mentor-Protégé Program established pursuant to section 831 of the National Defense
Authorization Act for Fiscal Year 1991 (Public Law 101-510; 10 USC 2301 note) shall be
granted credit for such assistance in accordance with subsection (g) of such section.
(e)

(1)

Except as provided in subsection (g)—
(A)

an executive agency intending to—

(i)
solicit bids or proposals for a contract for property or
services for a price expected to exceed $25,000;

108

SMALL BUSINESS ACT

(ii)
place an order, expected to exceed $25,000, under a basic
agreement, basic ordering agreement, or similar arrangement,
shall furnish for publication by the Secretary of Commerce a notice described in subsection (b)
of this section;
(B)
an executive agency intending to solicit bids or proposals for a
contract for property or services shall post, for a period of not less than ten days, in a public
place at the contracting office issuing the solicitation a notice of solicitation described in
subsection (f)—
(i)
in the case of an executive agency other than the
Department of Defense, if the contract is for a price expected to exceed $10,000, but not to
exceed $25,000; and
(ii)
in the case of the Department of Defense, if the contract is
for a price expected to exceed $5,000, but not to exceed $25,000; and
(C)
an executive agency awarding a contract for property or services
for a price exceeding $100,000, or placing an order referred to in clause (A)(ii) exceeding
$100,000, shall furnish for publication by the Secretary of Commerce a notice announcing the
award or order if there is likely to be any subcontract under such contract or order.
(2)
The Secretary of Commerce shall publish promptly in the Commerce
Business Daily each notice required by paragraph (1).
(3)
Whenever an executive agency is required by paragraph (1)(A) to furnish
a notice to the Secretary of Commerce, such executive agency may not—
(A)
issue the solicitation earlier than 15 days after the date on which
the notice is published by the Secretary of Commerce; or
(B)
in the case of a contract or order estimated to be greater than the
simplified acquisition threshold, establish a deadline for the submission of all bids or proposals
in response to the notice required by paragraph (1)(A) that—
(i)
in the case of an order under a basic agreement, basic
ordering agreement, or similar arrangement, is earlier than the date 30 days after the date the
notice required by paragraph (1)(A)(ii) is published;
(ii)
in the case of a solicitation for research and development, is
earlier than the date 45 days after the date the notice required by paragraph (1)(A)(i) is
published; or
(iii)

in any other case, is earlier than the date 30 days after the

date the solicitation is issued.

109

SMALL BUSINESS ACT

(f)
Each notice of solicitation required by subparagraph (A) or (B) of subsection
(e)(1) shall include—
(1)
an accurate description of the property or services to be contracted for,
which description (A) shall not be unnecessarily restrictive of competition, and (B) shall include,
as appropriate, the agency nomenclature, National Stock Number or other part number, and a
brief description of the item's form, fit, or function, physical dimensions, predominant material
of manufacture, or similar information that will assist a prospective contractor to make an
informed business judgment as to whether a copy of the solicitation should be requested;
(2)

provisions that—

(A)
state whether the technical data required to respond to the
solicitation will not be furnished as part of such solicitation, and identify the source in the
Government, if any, from which the technical data may be obtained; and
(B)
state whether an offeror, its product, or service must meet a
qualification requirement in order to be eligible for award, and, if so, identify the office from
which a qualification requirement may be obtained;
(3)

the name, business address, and telephone number of the contracting

officer;
(4)
a statement that all responsible sources may submit a bid, proposal, or
quotation (as appropriate) which shall be considered by the agency;
(5)
in the case of a procurement using procedures other than competitive
procedures, a statement of the reason justifying the use of such procedures and the identity of the
intended source; and
(6)
in the case of a contract in an amount estimated to be greater than $25,000
but not greater than the simplified acquisition threshold—
(A)

a description of the procedures to be used in awarding the contract;

and
(B)
a statement specifying the periods for prospective offerors and the
contracting officer to take the necessary preaward and award actions.
(g)

(1)

A notice is not required under subsection (e)(1)

if—
(A)
the proposed procurement is for an amount not greater than the
simplified acquisition threshold and is to be conducted by—

110

SMALL BUSINESS ACT

(i)
using widespread electronic public notice of the solicitation
in a form that allows convenient and universal user access through a single, Government-wide
point of entry; and
(ii)

permitting the public to respond to the solicitation

electronically.
(B)
the notice would disclose the executive agency's needs and the
disclosure of such needs would compromise the national security;
(C)

the proposed procurement would result from acceptance of—

(i)
any unsolicited proposal that demonstrates a unique and
innovative research concept and the publication of any notice of such unsolicited research
proposal would disclose the originality of thought or innovativeness of the proposal or would
disclose proprietary information associated with the proposal; or
(ii)

a proposal submitted under section 9 of this Act;

(D)

the procurement is made against an order placed under a

(E)

the procurement is made for perishable subsistence supplies;

requirements contract;

(F)
the procurement is for utility services, other than
telecommunication services, and only one source is available; or
(G)
the procurement is for the services of an expert for use in any
litigation or dispute (including preparation for any foreseeable litigation or dispute) that involves
or could involve the Federal Government in any trial, hearing, or proceeding before any court,
administrative tribunal, or agency, or in any part of an alternative dispute resolution process,
whether or not the expert is expected to testify.
(2)
The requirements of subsection (a)(1)(A) do not apply to any procurement
under conditions described in paragraph (2), (3), (4), (5), or (7) of section 303(c) of the Federal
Property and Administrative Services Act of 1949 (41 U.S.C. 253(c)) or paragraph (2), (3), (4),
(5), or (7) of section 2304(c) of title 10, United States Code.
(3)
The requirements of subsection (a)(1)(A) shall not apply in the case of any
procurement for which the head of the executive agency makes a determination in writing, after
consultation with the Administrator for Federal Procurement Policy and the Administrator of the
Small Business Administration, that it is not appropriate or reasonable to publish a notice before
issuing a solicitation.
(h)
(1)
An executive agency may not award a contract using procedures other
than competitive procedures unless—

111

SMALL BUSINESS ACT

(A)
except as provided in paragraph (2), a written justification for the
use of such procedures has been approved—
(i)
in the case of a contract for an amount exceeding $100,000
(but equal to or less than $1,000,000), by the advocate for competition for the procuring activity
(without further delegation);
(ii)
in the case of a contract for an amount exceeding
$1,000,000 (but equal to or less than $10,000,000), by the head of the procuring activity or a
delegate who, if a member of the Armed Forces, is a general or flag officer, or, if a civilian, is
serving in a position in grade GS-16 or above under the General Schedule (or in a comparable or
higher position under another schedule); or
(iii)
in the case of a contract for an amount exceeding
$10,000,000, by the senior procurement executive of the agency designated pursuant to section
16(3) of the Office of Federal Procurement Policy Act (41 U.S.C. 414(3)) (without further
delegation); and
(B)
all other requirements applicable to the use of such procedures
under title III of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 251 et
seq.) or chapter 137 of title 10, United States Code, as appropriate, have been satisfied.
(2)
The same exceptions as are provided in section 303(f)(2) of the Federal
Property and Administrative Services Act of 1949 (41 U.S.C. 253(f)(2)) or section 2304(f)(2) of
title 10, United States Code, shall apply with respect to the requirements of paragraph (1)(A) of
this subsection in the same manner as such exceptions apply to the requirements of section
303(f)(1) of such Act or section 2304(f)(1) of such title, as appropriate.
(i)
An executive agency shall make available to any business concern, or the
authorized representative of such concern, the complete solicitation package for any on- going
procurement announced pursuant to a notice under subsection (e). An executive agency may
require the payment of a fee, not exceeding the actual cost of duplication, for a copy of such
package.
(j)
For purposes of this section, the term "executive agency" has the meaning
provided such term in section 4(1) of the Office of Federal Procurement Policy Act (41 U.S.C.
403(1)).
(k)

NOTICES OF SUBCONTRACTING OPPORTUNITIES—

(1)
IN GENERAL.—Notices of subcontracting opportunities may be
submitted for publication in the Commerce Business Daily by—
(A)
a business concern awarded a contract by an executive agency
subject to subsection (e)(1)(C); and

112

SMALL BUSINESS ACT

(B)
a business concern that is a subcontractor or supplier (at any tier)
to such contractor having a subcontracting opportunity in excess of $10,000.
(2)

CONTENT OF NOTICE.—The notice of a subcontracting opportunity

shall include—
(A)
a description of the business opportunity that is comparable to the
description specified in paragraphs (1), (2), (3), and (4) of subsection (f); and
(B)

the due date for receipt of offers.

(l)
MANAGEMENT ASSISTANCE FOR SMALL BUSINESSES AFFECTED BY
MILITARY OPERATIONS.—The Administration shall utilize, as appropriate, its
entrepreneurial development and management assistance programs, including programs
involving State or private sector partners, to provide business counseling and training to any
small business concern adversely affected by the deployment of units of the Armed Forces of the
United States in support of a period of military conflict (as defined in section 7(n)(1)).
(m)
PROCUREMENT PROGRAM FOR WOMEN-OWNED SMALL BUSINESS
CONCERNS.—
(1)

DEFINITIONS.—In this subsection, the following definitions apply:

(A)
CONTRACTING OFFICER.—The term “contracting officer” has
the meaning given such term in section 27(f)(5) of the Office of Federal Procurement Policy Act
(41 U.S.C. 423(f)(5)).
(B)
SMALL BUSINESS CONCERN OWNED AND CONTROLLED
BY WOMEN.—The term “small business concern owned and controlled by women” has the
meaning given such term in section 3(n), except that ownership shall be determined without
regard to any community property law.
(2)
AUTHORITY TO RESTRICT COMPETITION.—In accordance with this
subsection, a contracting officer may restrict competition for any contract for the procurement of
goods or services by the Federal Government to small business concerns owned and controlled
by women, if—
(A)
each of the concerns 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);
(B)
the contracting officer has a reasonable expectation that 2 or more
small business concerns owned and controlled by women will submit offers for the contract;

113

SMALL BUSINESS ACT

(C)
the contract is for the procurement of goods or services with
respect to an industry identified by the Administrator pursuant to paragraph (3);
(D)

the anticipated award price of the contract (including options) does

not exceed—
(i)
$5,000,000, in the case of a contract assigned an industrial
classification code for manufacturing; or
(ii)

$3,000,000, in the case of all other contracts;

(E)
in the estimation of the contracting officer, the contract award can
be made at a fair and reasonable price; and
(F)

each of the concerns—

(i)
is certified by a Federal agency, a State government, or a
national certifying entity approved by the Administrator, as a small business concern owned and
controlled by women; or
(ii)
certifies to the contracting officer that it is a small business
concern owned and controlled by women and provides adequate documentation, in accordance
with standards established by the Administration, to support such certification.
(3)
WAIVER.—With respect to a small business concern owned and
controlled by women, the Administrator may waive subparagraph (2)(A) if the Administrator
determines that the concern is in an industry in which small business concerns owned and
controlled by women are substantially underrepresented.
(4)
IDENTIFICATION OF INDUSTRIES.—The Administrator shall conduct
a study to identify industries in which small business concerns owned and controlled by women
are underrepresented with respect to Federal procurement contracting.
(5)

ENFORCEMENT; PENALTIES.—

(A)
VERIFICATION OF ELIGIBILITY.—In carrying out this
subsection, the Administrator shall establish procedures relating to—
(i)
the filing, investigation, and disposition by the
Administration of any challenge to the eligibility of a small business concern to receive
assistance under this subsection (including a challenge, filed by an interested party, relating to
the veracity of a certification made or information provided to the Administration by a small
business concern under paragraph (2)(F)); and

114

SMALL BUSINESS ACT

(ii)
verification by the Administrator of the accuracy of any
certification made or information provided to the Administration by a small business concern
under paragraph (2)(F).
(B)
EXAMINATIONS.—The procedures established under
subparagraph (A) may provide for program examinations (including random program
examinations) by the Administrator of any small business concern making a certification or
providing information to the Administrator under paragraph (2)(F).
(C)
PENALTIES.—In addition to the penalties described in section
16(d), any small business concern that is determined by the Administrator to have
misrepresented the status of that concern as a small business concern owned and controlled by
women for purposes of this subsection, shall be subject to—
(i)

section 1001 of title 18, United States Code; and

(ii)

sections 3729 through 3733 of title 31, United States Code;

(6)
PROVISION OF DATA.—Upon the request of the Administrator, the
head of any Federal department or agency shall promptly provide to the Administrator such
information as the Administrator determines to be necessary to carry out this subsection.
(n)

BUSINESSLINC GRANTS AND COOPERATIVE AGREEMENTS.—

(1)
IN GENERAL.—In accordance with this subsection, the Administrator
may make grants to enter into cooperative agreements with any coalition of private entities,
public entities, or any combination of private and public entities—
(A)

to expand business-to-business relationships between large and

small businesses; and
(B)
to provide businesses, directly or indirectly, with online
information and a database of companies that are interested in mentor-protégé programs or
community-based, statewide, or local business development programs.
(2)
MATCHING REQUIREMENT.—Subject to subparagraph (B), the
Administrator may make a grant to a coalition under paragraph (1) only if the coalition provides
for activities described in paragraph (1)(A) or (1)(B) an amount, either in kind or in cash, equal
to the grant amount.
(3)
AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be
appropriated to carry out this subsection $6,600,000, to remain available until expended, for each
of fiscal years 2001 through 2006.
§ 9.
(a)
Research and development are major factors in the growth and progress of
industry and the national economy. The expense of carrying on research and development

115

SMALL BUSINESS ACT

programs is beyond the means of many small-business concerns, and such concerns are
handicapped in obtaining the benefits of research and development programs conducted at
Government expense. These small-business concerns are thereby placed at a competitive
disadvantage. This weakens the competitive free enterprise system and prevents the orderly
development of the national economy. It is the policy of the Congress that assistance be given to
small-business concerns to enable them to undertake and to obtain the benefits of research and
development in order to maintain and strengthen the competitive free enterprise system and the
national economy.
(b)

It shall be the duty of the Administration, and it is hereby empowered—

(l)
to assist small-business concerns to obtain Government contracts for
research and development;
(2)
to assist small-business concerns to obtain the benefits of research and
development performed under Government contracts or at Government expense;
(3)
to provide technical assistance to small-business concerns to accomplish
the purposes of this section; and
(4)
to develop and maintain a source file and an information program to
assure each qualified and interested small business concern the opportunity to participate in
Federal agency small business innovation research programs and small business technology
transfer programs;
(5)
to coordinate with participating agencies a schedule for release of SBIR
and STTR solicitations, and to prepare a master release schedule so as to maximize small
businesses' opportunities to respond to solicitations;
(6)
to independently survey and monitor the operation of SBIR and STTR
programs within participating Federal agencies; and
(7)
to report not less than annually to the Committee on Small Business of the
Senate and the Committee on Science and the Committee on Small Business of the House of
Representatives, on the SBIR and STTR programs of the Federal agencies and the
Administration's information and monitoring efforts related to the SBIR programs, including the
data on output and outcomes collected pursuant to subsections (g)(10) and (o)(9) , and (o)(15),
the number of proposals received from, and the number and total amount of awards to,
HUBZone small business concerns under each of the SBIR and STTR programs, and a
description of the extent to which Federal agencies are providing in a timely manner information
needed to maintain the database described in subsection (k).
(8)
to provide for and fully implement the tenets of Executive Order No.
13329 (Encouraging Innovation in Manufacturing).

116

SMALL BUSINESS ACT

(c)
The Administration is authorized to consult and cooperate with all Government
agencies and to make studies and recommendations to such agencies, and such agencies are
authorized and directed to cooperate with the Administration in order to carry out and to
accomplish the purposes of this section.
(d)
(l)
The Administrator is authorized to consult with representatives of
small-business concerns with a view to assisting and encouraging such firms to undertake joint
programs for research and development carried out through such corporate or other mechanism
as may be most appropriate for the purpose. Such joint programs may, among other things,
include the following purposes:
(A)
for the conduct of research;
(B)

to construct, acquire, or establish laboratories and other facilities

to undertake and utilize applied research;

(C)
to collect research information related to a particular industry and
disseminate it to participating members;
(D)
to conduct applied research on a protected, proprietary, and
contractual basis with member or nonmember firms, Government agencies, and others;
(E)
participating members; and

to prosecute applications for patents and render patent services for

(F)
to negotiate and grant licenses under patents held under the joint
program, and to establish corporations designed to exploit particular patents obtained by it.
(2)
The Administrator may, after consultation with the Attorney General and
the Chairman of the Federal Trade Commission, and with the prior written approval of the
Attorney General, approve any agreement between small-business firms providing for a joint
program of research and development, if the Administrator finds that the joint program proposed
will maintain and strengthen the free enterprise system and the economy of the Nation. The
Administrator or the Attorney General may at any time withdraw his approval of the agreement
and the joint program of research and development covered thereby, if he finds that the
agreement or the joint program carried on under it is no longer in the best interests of the
competitive free enterprise system and the economy of the Nation. A copy of the statement of
any such finding and approval intended to be within the coverage of this subsection, and a copy
of any modification or withdrawal of approval, shall be published in the Federal Register. The
authority conferred by this subsection on the Administrator shall not be delegated by him.
(3)
No act or omission to act pursuant to and within the scope of any joint
program for research and development, under an agreement approved by the Administrator under
this subsection, shall be construed to be within the prohibitions of the antitrust laws or the
Federal Trade Commission Act. Upon publication in the Federal Register of the notice of
withdrawal of his approval of the agreement granted under this subsection, either by the

117

SMALL BUSINESS ACT

Administrator or by the Attorney General, the provisions of this subsection shall not apply to any
subsequent act or omission to act by reason of such agreement or approval.
(e)

For the purpose of this section—

(1)
the term "extramural budget" means the sum of the total obligations minus
amounts obligated for such activities by employees of the agency in or through
Government-owned, Government- operated facilities, except that for the Department of Energy it
shall not include amounts obligated for atomic energy defense programs solely for weapons
activities or for naval reactor programs, and except that for the Agency for International
Development it shall not include amounts obligated solely for general institutional support of
international research centers or for grants to foreign countries;
(2)
the term "Federal agency" means an executive agency as defined in
section 105 of title 5, United States Code, or a military department as defined in section 102 of
such title, except that it does not include any agency within the Intelligence Community (as the
term is defined in section 3.4(f) of Executive Order 12333 or its successor orders);
(3)
the term "funding agreement" means any contract, grant, or cooperative
agreement entered into between any Federal agency and any small business for the performance
of experimental, developmental, or research work funded in whole or in part by the Federal
Government;
(4)
the term "Small Business Innovation Research Program" or "SBIR" means
a program under which a portion of a Federal agency's research or research and development
effort is reserved for award to small business concerns through a uniform process having -(A)
a first phase for determining, insofar as possible, the scientific and
technical merit and feasibility of ideas that appear to have commercial potential, as described in
subparagraph (B), submitted pursuant to SBIR program solicitations;
(B)
a second phase, to further develop proposals which meet particular
program needs, in which awards shall be made based on the scientific and technical merit and
feasibility of the proposals, as evidenced by the first phase, considering, among other things, the
proposal's commercial potential, as evidenced by—
(i)
the small business concern's record of successfully
commercializing SBIR or other research;
(ii)
the existence of second phase funding commitments from
private sector or non-SBIR funding sources;
(iii)

the existence of third phase, follow-on commitments for the

subject of the research; and

118

SMALL BUSINESS ACT

(iv)

the presence of other indicators of the commercial potential

of the idea; and
(C)

where appropria te, a third phase—

(i)
in which commercial applications of SBIR- funded research
or research and development are funded by non-Federal sources of capital or, for products or
services intended for use by the Federal Government, by follow-on non-SBIR Federal funding
awards; or
(ii)
for which awards from non-SBIR Federal funding sources
are used for the continuation of research or research and development that has been
competitively selected using peer review or scientific review criteria;
(5)
the term "research" or "research and development" means any activity
which is (A) a systematic, intensive study directed toward greater knowledge or understanding of
the subject studied; (B) a systematic study directed specifically toward applying new knowledge
to meet a recognized need; or (C) a systematic application of knowledge toward the production
of useful materials, devices, and systems or methods, including design, development, and
improvement of prototypes and new processes to meet specific requirements;
(6)
the term "Small Business Technology Transfer Program" or "STTR"
means a program under which a portion of a Federal agency's extramural research or research
and development effort is reserved for award to small business concerns for cooperative research
and development through a uniform process having—
(A)
a first phase, to determine, to the extent possible, the scientific,
technical, and commercial merit and feasibility of ideas submitted pursuant to STTR program
solicitations;
(B)
a second phase, to further develop proposed ideas to meet
particular program needs, in which awards shall be made based on the scientific, technical, and
commercial merit and feasibility of the idea, as evidenced by the first phase and by other relevant
information; and
(C)

where appropriate, a third phase—

(i)
in which commercial applications of STTR- funded research
or research and development are funded by non-Federal sources of capital or, for products or
services intended for use by the Federal Government, by follow-on non-STTR Federal funding
awards; and
(ii)
for which awards from non-STTR Federal funding sources
are used for the continuation of research or research and development that has been
competitively selected using peer review or scientific review criteria;

119

SMALL BUSINESS ACT

(7)
the term "cooperative research and development" means research or
research and development conducted jointly by a small business concern and a research
institution in which not less than 40 percent of the work is performed by the small business
concern, and not less than 30 percent of the work is performed by the research institution; and
(8)
the term "research institution" means a nonprofit institution, as defined in
section 4(5) of the Stevenson-Wydler Technology Innovation Act of 1980, and includes federally
funded research and development centers, as identified by the National Scientific Foundation in
accordance with the governmentwide Federal Acquisition Regulation issued in accordance with
section 35(c)(1) of the Offic e of Federal Procurement Policy Act (or any successor regulation
thereto).
(9)
the term “commercial applications” shall not be construed to exclude
testing and evaluation of products, services, or technologies for use in technical or weapons
systems, and further, awards for testing and evaluation of products, services, or technologies for
use in technical or weapons systems may be made in either the second or the third phase of the
Small Business Innovation Research Program and of the Small Business Technology Transfer
Program, as defined in this subsection.
(f)

FEDERAL AGENCY EXPENDITURES FOR THE SBIR PROGRAM.—

(1)
REQUIRED EXPENDITURE AMOUNTS.—Each Federal agency which
has an extramural budget for research or research and development in excess of $100,000,000 for
fiscal year 1992, or any fiscal year thereafter, shall expend with small business concerns—
(A)

not less than 1.5 percent of such budget in each of fiscal years

(B)

not less than 2.0 percent of such budget in each of fiscal years

(C)

not less than 2.5 percent of such budget in each fiscal year

1993 and 1994;

1995 and 1996; and

thereafter,
specifically in connection with SBIR programs which meet the requirements of this section,
policy directives, and regulations issued under this section.
(2)

LIMITATIONS.—A Federal agency shall not—

(A)
use any of its SBIR budget established pursuant to paragraph (1)
for the purpose of funding administrative costs of the program, including costs associated with
salaries and expenses; or
(B)
make available for the purpose of meeting the requirements of
paragraph (1) an amount of its extramural budget for basic research which exceeds the
percentages specified in paragraph (1).

120

SMALL BUSINESS ACT

(3)
EXCLUSION OF CERTAIN FUNDING AGREEMENTS.—Funding
agreements with small business concerns for research or research and development which result
from competitive or single source selections other than an SBIR program shall not be considered
to meet any portion of the percentage requirements of paragraph (1).
(g)
Each Federal agency required by subsection (f) to establish a small business
innovation research program shall, in accordance with this Act and regulations issued
hereunder—
(1)

unilaterally determine categories of projects to be in its SBIR program;

(2)
issue small business innovation research solicitations in accordance with a
schedule determined cooperatively with the Small Business Administration;
(3)
unilaterally determine research topics within the agency's SBIR
solicitations, giving special consideration to broad research topics and to topics that further 1 or
more critical technologies, as identified by—
(A)
the National Critical Technologies Panel (or its successor) in the
1991 report required under section 603 of the National Science and Technology Policy,
Organization, and Priorities Act of 1976, and in subsequent reports issued under that authority;
or
(B)
the Secretary of Defense, in the 1992 report issued in accordance
with section 2522 of title 10, United States Code, and in subsequent reports issued under that
authority;
(4)

unilaterally receive and evaluate proposals resulting from SBIR proposals;

(5)
subject to subsection (l), unilaterally select awardees for its SBIR funding
agreements and inform each awardee under such an agreement, to the extent possible, of the
expenses of the awardee that will be allowable under the funding agreement;
(6)
administer its own SBIR funding agreements (or delegate such
administration to another agency);
(7)
make payments to recipients of SBIR funding agreements on the basis of
progress toward or completion of the funding agreement requirements and, in all cases, make
payment to recipients under such agreements in full, subject to audit, on or before the last day of
the 12-month period beginning on the date of completion of such requirements;
(8)
make an annual report on the SBIR program to the Small Business
Administration and the Office of Science and Technology Policy;

121

SMALL BUSINESS ACT

(9)
include, as part of its annual performance plan as required by subsections
(a) and (b) of section 1115 of title 31, United States Code, a section on its SBIR program, and
shall submit such section to the Committee on Small Business of the Senate, and the Committee
on Science and the Committee on Small Business of the House of Representatives; and
(10) collect, and maintain in a common format in accordance with subsection
(v), such information from awardees as is necessary to assess the SBIR program, including
information necessary to maintain the database described in subsection (k).
(11) provide for and fully implement the tenets of Executive Order No. 13329
(Encouraging Innovation in Manufacturing).
(h)
In addition to the requirements of subsection (f), each Federal agency which has a
budget for research or research and development in excess of $20,000,000 for any fiscal year
beginning with fiscal year 1983 or subsequent fiscal year shall establish goals specifically for
funding agreements for research or research and development to small business concerns, and no
goal established under this subsection shall be less than the percentage of the agency's research
or research and development budget expended under funding agreements with small business
concerns in the immediately preceding fiscal year.
(i)

ANNUAL REPORTING.—

(1)
IN GENERAL.—Each Federal agency required by this section to have an
SBIR program or to establish goals shall report annually to the Small Business Administration
the number of awards pursuant to grants, contracts, or cooperative agreements over $10,000 in
amount and the dollar value of all such awards, identifying SBIR awards and comparing the
number and amount of such awards with awards to other than small business concerns.
(2)

CALCULATION OF EXTRAMURAL BUDGET.—

(A)
METHODOLOGY. —Not later than 4 months after the date of
enactment of each appropriations Act for a Federal agency required by this section to have an
SBIR program, the Federal agency shall submit to the Administrator a report, which shall include
a description of the methodology used for calculating the amount of the extramural budget of
that Federal agency.
(B)
ADMINISTRATOR’S ANALYSIS.—The Administrator shall
include an analysis of the methodology received from each Federal agency referred to in
subparagraph (A) in the report required by subsection (b)(7).
(j)
(1)
POLICY DIRECTIVES.—The Small Business Administration, after
consultation with the Administrator of the Office of Federal Procurement Policy, the Director of
the Office of Science and Technology Policy, and the Intergovernmental Affairs Division of the
Office of Management and Budget, shall, within one hundred and twenty days of the enactment
of the Small Business Innovation Development Act of 1982, issue policy directives for the

122

SMALL BUSINESS ACT

general conduct of the SBIR programs within the Federal Government, including providing
for—
(A)

simplified, standardized, and timely SBIR solicitations;

(B)

a simplified, standardized funding process which provides for
(i)

the timely receipt and review of proposals;

(ii)

outside peer review for at least phase two proposals, if

(iii)

protection of proprietary information provided in proposals;

(iv)

selection of awardees;

appropriate;

(v)
retention of rights in data generated in the performance of
the contract by the small business concern;
(vi)
transfer of title to property provided by the agency to the
small business concern if such a transfer would be more cost effective than recovery of the
property by the agency;
(vii)

cost sharing; and

(viii)

cost principles and payment schedules;

(C)
exemptions from the regulations under paragraph (2) if national
security or intelligence functions clearly would be jeopardized;
(D)
minimizing regulatory burden associated with participation in the
SBIR program for the small business concern which will stimulate the cost-effective conduct of
Federal research and development and the likelihood of commercialization of the results of
research and development conducted under the SBIR program;
(E)
simplified, standardized, and timely annual report on the SBIR
program to the Small Business Administration and the Office of Science and Technology Policy;
(F)
standardized and orderly withdrawal from program participation
by an agency having a SBIR program; at the discretion of the Administration, such directives
may require a phased withdrawal over a period of time sufficient in duration to minimize any
adverse impact on small business concerns; and
(G)
the voluntary participation in a SBIR program by a Federal agency
not required to establish such a program pursuant to subsection (f).

123

SMALL BUSINESS ACT

(2)
MODIFICATIONS.--Not later than 90 days after the enactment of the
Small Business Research and Development Enhancement Act of 1992, the Administrator shall
modify the policy directives issued pursuant to this subsection to provide for—
(A)
retention by a small business concern of the rights to data
generated by the concern in the performance of an SBIR award for a period of not less than 4
years;
(B)
continued use by a small business concern participating in the third
phase of the SBIR program, as a directed bailment, of any property transferred by a Federal
agency to the small business concern in the second phase of an SBIR program for a period of not
less than 2 years, beginning on the initial date of the concern's participation in the third phase of
such program;
(C)
procedures to ensure, to the extent practicable, that an agency
which intends to pursue research, development, or production of a technology developed by a
small business concern under an SBIR program enters into follow-on non-SBIR funding
agreements with the small business concern for such research, development, or production;
(D)
an increase to $100,000 in the first phase of an SBIR program, and
to $750,000 in the second phase of an SBIR program, and an adjustment of such amounts once
every 5 years to reflect economic adjustments and programmatic considerations;
(E)
a process for notifying the participating SBIR agencies and
potential SBIR participants of the 1991, 1992, and the current critical technologies, as
identified—
(i)
by the National Critical Technologies Panel (or its
successor), in accordance with section 603 of the National Science and Technology Policy,
Organization, and Priorities Act of 1976; or
(ii)
by the Secretary of Defense, in accordance with section
2522 of title 10, United States Code;
(F)
enhanced outreach efforts to increase the participation of socially
and economically disadvantaged small business concerns, as defined in section 8(a)(4), and the
participation of small businesses that are 51 percent owned and controlled by women in
technological innovation and in SBIR programs, including the third phase of suc h programs, and
the collection of data to document such participation;
(G)
technical and programmatic guidance to encourage agencies to
develop gap-funding programs to address the delay between an award for the first phase of an
SBIR program and the application for and extension of an award for the second phase of such
program;

124

SMALL BUSINESS ACT

(H)
procedures to ensure that a small business concern that submits a
proposal for a funding agreement for the first phase of an SBIR program and that has received
more than 15 second phase SBIR awards during the preceding 5 fiscal years is able to
demonstrate the extent to which it was able to secure third phase funding to develop concepts
resulting from previous second phase SBIR awards; and
(I)
procedures to ensure that agencies participating in the SBIR
program retain the information submitted under subparagraph (H) at least until the General
Accounting Office submits the report required under section 105 of the Small Business Research
and Development Enhancement Act of 1992.
(3)
ADDITIONAL MODIFICATIONS.—Not later than 120 days after the
date of enactment of the Small Business Innovation Research Program Reauthorization Act of
2000, the Administrator shall modify the policy directives issued pursuant to this subsection—
(A)
to clarify that the rights provided for under paragraph (2)(A) apply
to all Federal funding awards under this section, including the first phase (as described in
subsection (e)(4)(A)), the second phase (as described in subsection (e)(4)(B)), and the third
phase (as described in subsection (e)(4)(C));
(B)
to provide for the requirement of a succinct commercialization
plan with each application for a second phase award that is moving toward commercialization;
(C)
to require agencies to report to the Administration, not less
frequently than annually, all instances in which an agency pursued research, development, or
production of a technology developed by a small business concern using an award made under
the SBIR program of that agency, and determined that it was not practicable to enter into a
follow-on non-SBIR program funding agreement with the small business concern, which report
shall include, at a minimum—
(i)
the reasons why the follow-on funding agreement with the
small business concern was not practicable;
(ii)
the identity of the entity with which the agency contracted
to perform the research, development, or production; and
(iii)
a description of the type of funding agreement under which
the research, development, or production was obtained; and
(D)
to implement subsection (v), including establishing standardized
procedures for the provision of information pursuant to subsection (k)(3).
(k)

DATABASE.—

(1)
PUBLIC DATABASE.—Not later than 180 days after the date of
enactment of the Small Business Innovation Research Program Reauthorization Act of 2000, the

125

SMALL BUSINESS ACT

Administrator shall develop, maintain, and make available to the public a searchable, up-to-date,
electronic database that includes—
(A)
the name, size, location, and an identifying number assigned by the
Administrator, of each small business concern that has received a first phase or second phase
SBIR or STTR award from a Federal agency;
(B)
a description of each first phase or second phase SBIR or STTR
award received by that small business concern, including—
(i)
an abstract of the project funded by the award, excluding
any proprietary information so identified by the small business concern;
(ii)

the Federal agency making the award; and

(iii)

the date and amount of the award;

(C)
an identification of any business concern or subsidiary established
for the commercial application of a product or service for which an SBIR or STTR award is
made; and
(D)
required by section 35(d).
(E)

information regarding mentors and Mentoring Networks, as

with respect to assistance under the STTR program only—

(i)
whether the small business concern or the research
institution initiated their collaboration on each assisted STTR project;
(ii)
whether the small business concern or the research
institution originated any technology relating to the assisted STTR project;
(iii)
the length of time it took to negotiate any licensing
agreement between the small business concern and the research institution under each assisted
STTR project; and
(iv)
how the proceeds from commercialization, marketing, or
sale of technology resulting from each assisted STTR project were allocated (by percentage)
between the small business concern and the research institution.
(2)
GOVERNMENT DATABASE.—Not later than 180 days after the date of
enactment of the Small Business Innovation Research Program Reauthorization Act of 2000, the
Administrator, in consultation with Federal agencies required to have an SBIR program pursuant
to subsection (f)(1), shall develop and maintain a database to be used solely for SBIR program
evaluation that—

126

SMALL BUSINESS ACT

(A)

contains for each second phase award made by a Federal agency—

(i)
information collected in accordance with paragraph (3) on
revenue from the sale of new products or services resulting from the research conducted under
the award;
(ii)
information collected in accordance with paragraph (3) on
additional investment from any source, other than first phase or second phase SBIR or STTR
awards, to further the research and development conducted under the award; and
(iii)
any other information received in connection with the
award that the Administrator, in conjunction with the SBIR program managers of Federal
agencies, considers relevant and appropriate;
(B)
includes any narrative information that a small business concern
receiving a second phase award voluntarily submits to further describe the outputs and outcomes
of its awards;
(C)
includes for each applicant for a first phase or second phase award
that does not receive such an award—
(i)
assigned by the Administration;

the name, size, and location, and an identifying number

(ii)

an abstract of the project; and

(iii)

the Federal agency to which the application was made;

(D)
includes any other data collected by or available to any Federal
agency that such agency considers may be useful for SBIR program evaluation; and
(E)
is available for use solely for program evaluation purposes by the
Federal Government or, in accordance with policy directives issued by the Administration, by
other authorized persons who are subject to a use and nondisclosure agreement with the Federal
Government covering the use of the database.
(3)

UPDATING INFORMATION FOR DATABASE.—

(A)
IN GENERAL.—A small business concern applying for a second
phase award under this section shall be required to update information in the database established
under this subsection for any prior second phase award received by that small business concern.
In complying with this paragraph, a small business concern may apportion sales or additional
investment information relating to more than one second phase award among those awards, if it
notes the apportionment for each award.

127

SMALL BUSINESS ACT

(B)
ANNUAL UPDATES UPON TERMINATION.—A small
business concern receiving a second phase award under this section shall—
(i)
update information in the database concerning that award at
the termination of the award period; and
(ii)
be requested to voluntarily update such information
annually thereafter for a period of 5 years.
(4)
PROTECTION OF INFORMATION.—Information provided under
paragraph (2) shall be considered privileged and confidential and not subject to disclosure
pursuant to section 552 of title 5, Untied States Code.
(5)
RULE OF CONSTRUCTION.—Inclusion of information in the database
under this subsection shall not be considered to be publication for purposes of subsection (a) or
(b) of section 102 of title 35, United States Code.
(l)
REPORTING OF AWARDS MADE FROM SINGLE PROPOSAL, TO
MULTIPLE AWARD WINNERS, OR TO CRITICAL TECHNOLOGY TOPICS-(1)
SINGLE PROPOSAL.—If a Federal agency required to establish an SBIR
program under subsection (f) makes an award with respect to an SBIR solicitation topic or
subtopic for which the agency received only 1 proposal, the agency shall provide written
justification for making the award in its next quarterly report to the Administration and in the
agency's next annual report required under subsection (g)(8).
(2)
MULTIPLE AWARDS.—An agency referred to in paragraph (1) shall
include in its next annual report required under subsection (g)(8) an accounting of the awards the
agency has made for the first phase of an SBIR program during the reporting period to entities
that have received more than 15 awards for the second phase of an SBIR program during the
preceding 5 fiscal years.
(3)
CRITICAL TECHNOLOGY AWARDS.—An agency referred to in
paragraph (1) shall include in its next annual report required under subsection (g)(8) an
accounting of the number of awards it has made to critical technology topics, as defined in
subsection (g)(3), including an identification of the specific critical technologies topics, and the
percentage by number and dollar amount of the agency's total SBIR awards to such critical
technology topics.
(m)
TERMINATION.—The authorization to carry out the Small Business Innovation
Research Program under this section shall terminate on September 30, 2008.
(n)

REQUIRED EXPENDITURES FOR STTR BY FEDERAL AGENCIES.—
(1)

REQUIRED EXPENDITURE AMOUNTS.—

128

SMALL BUSINESS ACT

(A)
IN GENERAL.—With respect to each fiscal year through fiscal
year 2009, each Federal agency that has an extramural budget for research, or research and
development, in excess of $1,000,000,000 for that fiscal year, shall expend with small business
concerns not less than the percentage of that extramural budget specified in subparagraph (B),
specifically in connection with STTR programs that meet the requirements of this section and
any policy directives and regulations issued under this section.
(B)
EXPENDITURE AMOUNTS.—The percentage of the extramural
budget required to be expended by an agency in accordance with subparagraph (A) shall be—
(i)

0.15 percent for each fiscal year through fiscal year 2003;

(ii)

0.3 percent for fiscal year 2004 and each fiscal year

and

thereafter.
(2)

LIMITATIONS.—A Federal agency shall not—

(A)
use any of its STTR budget established pursuant to paragraph (1)
for the purpose of funding administrative costs of the program, including costs associated with
salaries and expenses, or, in the case of a small business concern or a research institution, costs
associated with salaries, expenses, and administrative overhead (other than those direct or
indirect costs allowable under guidelines of the Office of Management and Budget and the
governmentwide Federal Acquisition Regulation issued in accordance with section 25(c)(1) of
the Office of Federal Procurement Policy Act); or
(B)
make available for the purpose of meeting the requirements of
paragraph (1) an amount of its extramural budget for basic research which exceeds the
percentage specified in paragraph (1).
(3)
EXCLUSION OF CERTAIN FUNDING AGREEMENTS.—Funding
agreements with small business concerns for research or research and development which result
from competitive or single source selections other than an STTR program shall not be considered
to meet any portion of the percentage requirements of paragraph (1).
(o)
FEDERAL AGENCY STTR AUTHORITY.—Each Federal agency required to
establish an STTR program in accordance with subsection (n) and regulations issued under this
Act, shall—
(1)

unilaterally determine categories of projects to be included in its STTR

program;
(2)
issue STTR solicitations in accordance with a schedule determined
cooperatively with the Administration;

129

SMALL BUSINESS ACT

(3)
unilaterally determine research topics within the agency's STTR
solicitations, giving special consideration to broad research topics and to topics that further 1 or
more critical technologies, as identified—
(A)
by the National Critical Technologies Panel (or its successor) in
reports required under section 603 of the National Science and Technology Policy, Organization,
and Priorities Act of 1976; or
(B)
by the Secretary of Defense, in accordance with section 2522 of
title 10, United States Code;
(4)

unilaterally receive and evaluate proposals resulting from STTR

solicitations;
(5)
unilaterally select awardees for its STTR funding agreements and inform
each awardee under such an agreement, to the extent possible, of the expenses of the awardee
that will be allowable under the funding agreement;
(6)
administer its own STTR funding agreements (or delegate such
administration to another agency);
(7)
make payments to recipients of STTR funding agreements on the basis of
progress toward or completion of the funding agreement requirements and, in all cases, make
payment to recipients under such agreements in full, subject to audit, on or before the last day of
the 12-month period beginning on the date of the completion of such requirements;
(8)
include, as part of its annual performance plan as required by subsections
(a) and (b) of section 1115 of title 31, United States Code, a section on its STTR program, and
shall submit such section to the Committee on Small Business of the Senate, and the Committee
on Science and the Committee on Small Business of the House of Representatives;
(9)
collect such data from awardees as is necessary to assess STTR program
outputs and outcomes;
(10) submit an annual report on the STTR program to the Administration and
the Office of Science and Technology Policy;
(11) adopt the agreement developed by the Administrator under subsection (w)
as the agency’s model agreement for allocating between small business concerns and research
institutions intellectual property rights and rights, if any, to carry out follow-on research,
development, or commercialization;
(12) develop, in consultation with the Office of Federal Procurement Policy
and the Office of Government Ethics, procedures to ensure that federally funded research and
development centers (as defined in subsection (e)(8)) that participate in STTR agreements—

130

SMALL BUSINESS ACT

(A)

are free from organizational conflicts of interests relative to the

STTR program;
(B)
do not use privileged information gained through work performed
for an STTR agency or private access to STTR agency personnel in the development of an STTR
proposal; and
(C)

use outside peer review, as appropriate; and

(13) not later than July 31, 1993, develop procedures for assessing the
commercial merit and feasibility of STTR proposals, as evidenced by—
(A)
the small business concern's record of successfully
commercializing STTR or other research;
(B)
the existence of second phase funding commitments from private
sector or non-STTR funding sources;
(C)

the existence of third phase follow-on commitments for the subject

(D)

the presence of other indicators of the commercial potential of the

of the research; and

idea.
(14) implement an outreach program to research institutions and small business
concerns for the purpose of enhancing its STTR program, in conjunction with any such outreach
done for purposes of the SBIR program; and
(15) collect, and maintain in a common format in accordance with subsection
(v), such information from awardees as is necessary to assess the STTR program, including
information necessary to maintain the database described in subsectio n (k).
(16) provide for and fully implement the tenets of Executive Order No. 13329
(Encouraging Innovation in Manufacturing).
(p)

STTR POLICY DIRECTIVE.—

(1)
ISSUANCE.—The Administrator shall issue a policy directive for the
general conduct of the STTR programs within the Federal Government. Such policy directive
shall be issued after consultation with—
(A)
the heads of each of the Federal agencies required by subsection
(n) to establish an STTR program;
(B)
the Under Secretary of Commerce for Intellectual Property and
Director of the United States Patent and Trademark Office; and

131

SMALL BUSINESS ACT

(C)
(2)

the Director of the Office of Federal Procurement Policy.

CONTENTS.—The policy directive required by paragraph (1) shall

provide for—
(A)

simplified, standardized, and timely STTR solicitations;

(B)

a simplified, standardized funding process that provides for—
(i)

the timely receipt and review of proposals;

(ii)

outside peer review, if appropriate;

(iii)

protection of proprietary information provided in proposals;

(iv)

selection of awardees;

(v)
retention by a small business concern of the rights to data
generated by the concern in the performance of an STTR award for a period of not less than 4
years;
(vi)
continued use by a small business concern, as a directed
bailment, of any property transferred by a Federal agency to the small business concern in the
second phase of the STTR program for a period of not less than 2 years, beginning on the initial
date of the concern's participation in the third phase of such program;
(vii)

cost sharing;

(viii)

cost principles and payment schedules; and

(ix)
1-year awards for the first phase of an STTR program,
generally not to exceed $100,000 and 2-year awards for the second phase of an STTR program,
generally not to exceed $750,000, greater or lesser amounts to be awarded at the discretion of the
awarding agency, and shorter or longer periods of time to be approved at the discretion of the
awarding agency where appropriate for a particular project;
(C)

minimizing regulatory burdens associated with participation in

STTR programs;
(D)
guidelines for a model agreement, to be used by all agencies, for
allocating between small business concerns and research ins titutions intellectual property rights
and rights, if any, to carry out follow-on research, development, or commercialization;
(E)

procedures to ensure that—

132

SMALL BUSINESS ACT

(i)
a recipient of an STTR award is a small business concern,
as defined in section 3 and the regulations promulgated thereunder; and
(ii)
such small business concern exercises management and
control of the performance of the STTR funding agreement pursuant to a business plan providing
for the commercialization of the technology that is the subject matter of the award; and
(F)
procedures to ensure, to the extent practicable, that an agency
which intends to pursue research, development, or production of a technology developed by a
small business concern under an STTR program enters into follow-on, non-STTR funding
agreements with the small business concern for such research, development, or production.
(3)
MODIFICATIONS.—Not later than 120 days after the date of enactment
of this paragraph, the Administrator shall modify the policy directive issued pursuant to this
subsection to clarify that the rights provided for under paragraph (2)(B)(v) apply to all Federal
funding awards under this section, including the first phase (as described in subsection
(e)(6)(A)), the second phase (as described in subsection (e)(6)(B)), and the third phase (as
described in subsection (e)(6)(C)).
(q)

DISCRETIONARY TECHNICAL ASSISTANCE.—

(1)
IN GENERAL.—Each Federal agency required by this section to conduct
an SBIR program may enter into an agreement with a vendor selected under paragraph (2) to
provide small business concerns engaged in SBIR projects with technical assistance services,
such as access to a network of scientists and engineers engaged in a wide range of technologies,
or access to technical and business literature available through on- line data bases, for the purpose
of assisting such concerns in—
(A)

making better technical decisions concerning such projects;

(B)

solving technical problems which arise during the conduct of such

(C)

minimizing technical risks associated with such projects; and

projects;

(D)
developing and commercializing new commercial products and
processes resulting from such projects.
(2)
VENDOR SELECTION.—Each agency may select a vendor to assist
small business concerns to meet the goals listed in paragraph (1) for a term not to exceed 3 years.
Such selection shall be competitive and shall utilize merit-based criteria.
(3)

ADDITIONAL TECHNICAL ASSISTANCE.—

133

SMALL BUSINESS ACT

(A)
FIRST PHASE.—Each agency referred to in paragraph (1) may
provide services described in paragraph (1) to first phase SBIR award recipients in an amount
equal to not more than $4,000, which shall be in addition to the amount of the recipient's award.
(B)
SECOND PHASE.—Each agency referred to in paragraph (1) may
authorize any second phase SBIR award recipient to purchase, with funds available from their
SBIR awards, services described in paragraph (1), in an amount equal to not more than $4,000
per year.
(r)

THIRD PHASE AGREEMENTS.—

(1)
IN GENERAL.—In the case of a small business concern that is awarded a
funding agreement for the second phase of an SBIR or STTR program, a Federal agency may
enter into a third phase agreement with that business concern for additional work to be
performed during or after the second phase period. The second phase funding agreement with
the small business concern may, at the discretion of the agency awarding the agreement, set out
the procedures applicable to third phase agreements with that agency or any other agency.
(2)
DEFINITION.—In this subsection, the term "third phase agreement"
means a follow-on, non-SBIR or non-STTR funded contract as described in paragraph (4)(C) or
paragraph (6)(C) of subsection (e).
(3)
INTELLECTUAL PROPERTY RIGHTS.—Each funding agreement
under an SBIR or STTR program shall include provisions setting forth the respective rights of
the United States and the small business concern with respect to intellectual property rights and
with respect to any right to carry out follow-on research.
(s)

OUTREACH.

(1)
DEFINITION OF ELIGIBLE STATE.—In this subsection, the term
“eligible State” means a State—
(A)
if the total value of contracts awarded to the State during fiscal
year 1995 under this section was less than $5,000,000; and
(B)
that certifies to the Administration described in paragraph (2) that
the State will, upon receipt of assistance under this subsection, provide matching funds from
non-Federal sources in an amount that is not less than 50 percent of the amount provided under
this subsection.
(2)
PROGRAM AUTHORITY.—Of amounts made available to carry out this
section for each of the fiscal years 2000 through 2005 the Administrator may expend with
eligible States not more than $2,000,000 in each such fiscal year in order to increase the
participation of small business concerns located in those States in the programs under this
section.

134

SMALL BUSINESS ACT

(3)
AMOUNT OF ASSISTANCE.—The amount of assistance provided to an
eligible State under this subsection in any fiscal year—
(A)
shall be equal to twice the total amount of matching funds from
non-Federal sources provided by the State; and
(B)

shall not exceed $100,000.

(4)
USE OF ASSISTANCE.—Assistance provided to an eligible State under
this subsection shall be used by the State, in consultation with State and local departments and
agencies, for programs and activities to increase the participation of small business concerns
located in the State in the programs under this section, including—
(A)

the establishment of quantifiable performance goals, including

goals relating to—
(i)
the number of program awards under this section made to
small business concerns in the State; and
(ii)
the total amount of Federal research and development
contracts awarded to small business concerns in the State;
(B)
the provision of competition outreach support to small business
concerns in the State that are involved in research and development; and
(C)
the development and dissemination of educational and promotional
information relating to the programs under this section to small business concerns in the State.
(t)
INCLUSION IN STRATEGIC PLANS.—Program information relating to the
SBIR and STTR programs shall be included by each Federal agency in any update or revision
required of the Federal agency under section 306(b) of title 5, United States.
(u)

COORDINATION OF TECHNOLOGY DEVELOPMENT PROGRAMS.—

(1)
DEFINITION OF TECHNOLOGY DEVELOPMENT PROGRAM.—In
this subsection, the term “technology development program” means—
(A)
the Experimental Program to Stimulate Competitive Research of
the National Science Foundation, as established under section 113 of the National Science
Foundation Authorization Act of 1988 (42 U.S.C. 1862g);
(B)
the Defense Experimental Program to Stimulate Competitive
Research of the Department of Defense;
(C)
the Department of Energy;

the Experimental Program to Stimulate Competitive Research of

135

SMALL BUSINESS ACT

(D)
the Experimental Program to Stimulate Competitive Research of
the Environmental Protection Agency;
(E)
the Experimental Program to Stimulate Competitive Research of
the National Aeronautics and Space Administration;
(F)
Institutes of Health; and

the Institutional Development Award Program of the National

(G)
the National Research Initiative Competitive Grants Program of
the Department of Agriculture.
(2)
COORDINATION REQUIREMENTS.—Each Federal agency that is
subject to subsection (f) and that has established a technology development program may, in
each fiscal year, review fo r funding under that technology development program—
(A)
any proposal to provide outreach and assistance to 1 or more small
business concerns interested in participating in the SBIR program, including any proposal to
make a grant or loan to a company to pay a portion or all of the cost of developing an SBIR
proposal, from an entity, organization, or individual located in—
(i)

a State that is eligible to participate in that program; or

(ii)

a State described in paragraph (3); or

(B)
any proposal for the first phase of the SBIR program, if the
proposal, though meritorious, is not funded through the SBIR program for that fiscal year due to
funding restraints, from a small business concern located in—
(i)

a State that is eligible to participate in a technology

(ii)

a State described in paragraph (3).

development program; or

(3)
ADDITIONALLY ELIGIBLE STATE.—A State referred to in
subparagraph (A)(ii) or (B)(ii) of paragraph (2) is a State in which the total value of contracts
awarded to small business concerns under all SBIR programs is less than the total value of
contracts awarded to small business concerns in a majority of other States, as determined by the
Administrator in biennial fiscal years, beginning with fiscal year 2000, based on the most recent
statistics compiled by the Administrator.
(v)
SIMPLIFIED REPORTING REQUIREMENTS.—The Administrator shall work
with the Federal agencies required by this section to have an SBIR or STTR program to
standardize reporting requirements for the collection of data from SBIR or STTR applicants and
awardees, including data for inclusion in the database under subsection (k), taking into

136

SMALL BUSINESS ACT

consideration the unique needs of each agency, and to the extent possible, permitting the
updating of previously reported information by electronic means. Such requirements shall be
designed to minimize the burden on small businesses.
(w)
RIGHTS.—

STTR MODEL AGREEMENT FOR INTELLECTUAL PROPERTY

(1)
IN GENERAL.—The Administrator shall promulgate regulations
establishing a single model agreement for use in the STTR program that allocates between small
business concerns and research institutions intellectual property rights and rights, if any, to carry
out follow-on research, development, or commercialization.
(2)
OPPORTUNITY FOR COMMENT.—In promulgating regulations under
paragraph (1), the Administrator shall provide to affected agencies, small business concerns,
research institutions, and other interested parties the opportunity to submit written comments.
(x)

RESEARCH AND DEVELOPMENT FOCUS.—

(1)
REVISION AND UPDATE OF CRITERIA AND PROCEDURES OF
IDENTIFICATION.—In carrying out subsection (g), the Secretary of Defense shall, not less
often than once every 4 years, revise and update the criteria and procedures utilized to identify
areas of the research and development efforts of the Department of Defense which are suitable
for the provision of funds under the Small Business Innovation Research Program and the Small
Business Technology Transfer Program.
(2)
UTILIZATION OF PLANS.—The criteria and procedures described in
paragraph (1) shall be developed through the use of the most current versions of the following
plans:
(A)
The Joint Warfighting Science and Technology Plan required
under section 270 of the National Defense Authorization Act for Fiscal Year 1997 (Public Law
104-201; 10 U.S.C. 2501 note).
(B)

The Defense Technology Area Plan of the Department of Defense.

(C)

The Basic Research Plan of the Department of Defense.

(3)
INPUT IN IDENTIFICATION OF AREAS OF EFFORT.—The criteria
and procedures described in paragraph (1) shall include input in the identification of areas of
research and development efforts described in that paragraph from Department of Defense
program managers (PMs) and program executive officers (PEOs).
(y)

COMMERCIALIZATION PILOT PROGRAM.—

(1)
IN GENERAL.—The Secretary of Defense and the Secretary of each
military department is authorized to create and administer a “Commercialization Pilot Program”

137

SMALL BUSINESS ACT

to accelerate the transition of technologies, products, and services developed under the Small
Business Innovation Research Program to Phase III, including the acquisition process.
(2)
IDENTIFICATION OF RESEARCH PROGRAMS FOR
ACCELERATED TRANSITION TO ACQUISITION PROCESS.—In carrying out the
Commercialization Pilot Program, the Secretary of Defense and the Secretary of each military
department shall identify research programs of the Small Business Innovation Research Program
that have the potential for rapid transitioning to Phase III and into the acquisition process.
(3)
LIMITATION.—No research program may be identified under paragraph
(2) unless the Secretary of the military department concerned certifies in writing that the
successful transition of the program to Phase III and into the acquisition process is expected to
meet high priority military requirements of such military department.
(4)
FUNDING.—For payment of expenses incurred to administer the
Commercialization Pilot Program under this subsection, the Secretary of Defense and each
Secretary of a military department is authorized to use not more than an amount equal to 1
percent of the funds available to the Department of Defense or the military department pursuant
to the Small Business Innovation Research Program. Such funds—
(A)

shall not be subject to the limitations on the use of funds in

(B)

shall not be used to make Phase III awards.

subsection (f)(2); and

(5)
EVALUATIVE REPORT.—At the end of each fiscal year, the Secretary
of Defense shall submit to the Committee on Armed Services and the Committee on Small
Business and Entrepreneurship of the Senate and the Committee on Armed Services and the
Committee on Small Business of the House of Representatives an evaluative report regarding
activities under the Commercialization Pilot Program. The report shall include—
(A)

an accounting of the funds used in the Commercialization Pilot

Program;
(B)
a detailed description of the Commercialization Pilot Program,
including incentives and activities undertaken by acquisition program managers, program
executive officers, and prime contractors; and
(C)
a detailed compilation of results achieved by the
Commercialization Pilot Program, including the number of small business concerns assisted and
the number of projects commercialized.
(6)
SUNSET.—The pilot program under this subsection shall terminate at the
end of fiscal year 2009.

138

SMALL BUSINESS ACT

§ l0. (a)
The Administration shall, as soon as practicable each fiscal year make a
comprehensive annual report to the President, the President of the Senate, the Senate Select
Committee on Small Business, and the Speaker of the House of Representatives. Such report
shall include a description of the state of small business in the Nation and the several States, and
a description of the operations of the Administration under this chapter, including, but not
limited to, the general lending, disaster relief, Government regulation relief, procurement and
property disposal, research and development, technical assistance, dissemination of data and
information, and other functions under the jurisdiction of the Administration during the previous
fiscal year. Such report shall contain recommendations for strengthening or improving such
programs, or, when necessary or desirable to implement more effectively congressional policies
and proposals, for establishing new or alternative programs. In addition, such report shall
include the names of the business concerns to whom contracts are let and for whom financing is
arranged by the Administration, together with the amounts involved. With respect to minority
small business concerns, the report shall include the proportion of loans and other assistance
under this Act provided to such concerns, the goals of the Administration for the next fiscal year
with respect to such concerns, and recommendations for improving assistance to minority small
business concerns under this Act.
(b)
The Administration shall make a report to the President, the President of the
Senate, and the Speaker of the House of Representatives, to the Senate Select Committee on
Small Business, and to the Committee on Small Business of the House of Representatives, as
soon as practicable each fiscal year, showing as accurately as possible for each such period the
amount of funds appropriated to it that it has expended in the conduct of each of its principal
activities such as lending, procurement, contracting, and providing technical and managerial
aids. Such report shall contain the number and amount of loans, the number of applications, the
total amount applied for, and the number and amount of defaults for each type of equipment or
service for which loans are authorized by this Act. Such report shall provide such information
separately on each type of loan made under paragraphs (10) through (15) of section 7(a) and
separately for all other loan programs. In addition, the information on loans shall be supplied on
a monthly basis to the Committee on Small Business of the Senate and the Committee on Small
Business of the House of Representatives.
(c)

[Repealed].

(d)
For the purpose of aiding in carrying out the national policy to insure that a fair
proportion of the total purchases and contracts for property and services for the Government be
placed with small-business enterprises, and to maintain and strengthen the overall economy of
the Nation, the Department of Defense shall make an annual report to the Committees on Small
Business of the Senate and the House of Representatives showing the amount of funds
appropriated to the Department of Defense which have been expended, obligated, or contracted
to be spent with small business concerns and the amount of such funds expended, obligated, or
contracted to be spent with firms other than small business in the same fields of operation; and
such reports shall show separately the funds expended, obligated, or contracted to be spent for
basic and applied scientific research and development.

139

SMALL BUSINESS ACT

(e)
The Administration and the Inspector General of the Administration shall retain
all correspondence, records of inquiries, memoranda, reports, books, and records, including
memoranda as to all investigations conducted by or for the Administration, for a period of at
least one year from the date of each thereof, and shall at all times keep the same available for
inspection and examination by the Senate Select Committee on Small Business and the
Committee on Small Business of the House of Representatives, or their duly authorized
representatives.
(2)
The Committee on Small Business of either the Senate or the House of
Representatives may request that the Office of the Inspector General of the Administration
conduct an investigation of any program or activity conducted under the authority of section 7(j)
or 8(a). Not later than thir ty days after the receipt of such a request, the Inspector General shall
inform the committee, in writing, of the disposition of the request by such office.
(f)
To the extent deemed necessary by the Administrator to protect and preserve
small-business interests, the Administration shall consult and cooperate with other departments
and agencies of the Federal Government in the formulation by the Administration of policies
affecting small-business concerns. When requested by the Administrator, each department and
agency of the Federal Government shall consult and cooperate with the Administration in the
formulation by the Administration of policies affecting small-business concerns. When
requested by the Administrator, each department and agency of the Federal Government shall
consult and cooperate with the Administration in the formulation by such department or agency
of policies affecting small- business concerns, in order to insure that small-business interests will
be recognized, protected, and preserved. This subsection shall not require any department or
agency to consult or cooperate with the Administration in any case where the head of such
department or agency determines that such consultation or cooperation would unduly delay
action which must be taken by such department or agency to protect the national interest in an
emergency.
(g)
The Administration shall transmit, not later than December 3l of each year, to the
Senate Select Committee on Small Business and Committee on Small Business of the House of
Representatives a sealed report with respect to—
(l)
complaints alleging illegal conduct by employees of the Administration
which were received or acted upon by the Administration during the preceding fiscal year; and
(2)
investigations undertaken by the Administration, including external and
internal audits and security and investigation reports.
(h)
The Administration shall transmit, not later than March 31 of each year, to the
Committees on Small Business of the Senate and House of Representatives a report on the
secondary market operations during the preceding calendar year. This report shall include, but
not be limited to, (1) the number and the total dollar amount of loans sold into the secondary
market and the distribution of such loans by size of loan, size of lender, geographic location of
lender, interest rate, maturity, lender servicing fees, whether the rate is fixed or variable, and
premium paid; (2) the number and dollar amount of loans resold in the secondary market with a

140

SMALL BUSINESS ACT

distribution by size of loan, interest rate, and premiums; (3) the number and total dollar amount
of pools formed; (4) the number and total dollar amount of loans in each pool; (5) the dollar
amount, interest rate, and terms on each loan in each pool and whether the rate is fixed or
variable; (6) the number, face value, interest rate, and terms of the trust certificates issued for
each pool; (7) to the maximum extent possible, the use by the lender of the proceeds of sales of
loans in the secondary market for additional lending to small business concerns; and (8) an
analysis of the information reported in (1) through (7) to assess small businesses' access to
capital at reasonable rates and terms as a result of secondary market operations.
§ 11. (a)
The President is authorized to consult with representatives of small-business
concerns with a view to encouraging the making by such persons with the approval of the
President of voluntary agreements and programs to further the objectives of this Act.
(b)
No act or omission to act pursuant to this Act which occurs while this Act is in
effect, if requested by the President pursuant to a voluntary agreement or program approved
under subsection (a) of this section and found by the President to be in the public interest as
contributing to the national defense, shall be construed to be within the prohibitions of the
antitrust laws or the Federal Trade Commission Act of the United States. A copy of each such
request intended to be within the coverage of this section, and any modification or withdrawal
thereof, shall be furnished to the Attorney General and the Chairman of the Federal Trade
Commission when made, and it shall be published in the Federal Register unless publication
thereof would, in the opinion of the President, endanger the national security.
(c)
The authority granted in subsection (b) of this section shall be delegated only (1)
to an official who shall for the purpose of such delegation be required to be appointed by the
President by and with the advice and consent of the Senate, (2) upon the condition that such
official consult with the Attorney General and the Chairman of the Federal Trade Commission
not less than ten days before making any request or finding thereunder, and (3) upon the
condition that suc h official obtain the approval of the Attorney General to any request thereunder
before making the request.
(d)
Upon withdrawal of any request or finding hereunder, or upon withdrawal by the
Attorney General of his approval of the voluntary agreement or program on which the request or
finding is based, the provisions of this section shall not apply to any subsequent act, or omission
to act, by reason of such finding or request.
§ 12. The President may transfer to the Administration any functions, powers, and duties of
any department or agency which relate primarily to small-business problems. In connection with
any such transfer, the President may provide for appropriate transfers of records, property,
necessary personnel, and unexpended balances of appropriations and other funds available to the
department or agency from which the transfer is made.
§ 13. No loan shall be made or equipment, facilities, or services furnished by the
Administration under this Act to any business enterprise unless the owners, partners, or officers
of such business enterprise (1) certify to the Administration the names of any attorneys, agents,
or other persons engaged by or on behalf of such business enterprise for the purpose of

141

SMALL BUSINESS ACT

expediting applications made to the Administration for assistance of any sort, and the fees paid
or to be paid to any such persons; (2) execute an agreement binding any such business enterprise
for a period of two years after any assistance is rendered by the Administration to such business
enterprise, to refrain from employing, tendering any office or employment to, or retaining for
professional service, any person, who, on the date such assistance or any part thereof was
rendered, or within one year prior thereto, shall have served as an officer, attorney, agent, or
employee of the Administration occupying a position or engaging in activities which the
Administration shall have determined involve discretion with respect to the granting of
assistance under this Act; and (3) furnish the names of lending institutions to which such
business enterprise has applied for loans together with dates, amounts, terms, and proof of
refusal.
§ 14. To the fullest extent the Administration deems practicable, it shall make a fair charge for
the use of Government-owned property and make and let contracts on a basis that will result in a
recovery of the direct cost incurred by the Administration.
§ 15. (a)
To effectuate the purposes of this Act, small business concerns within the
meaning of this Act shall receive any award or contract or any part thereof, and be awarded any
contract for the sale of Government property, as to which it is determined by the Administration
and the contracting procurement or disposal agency (1) to be in the interest of maintaining or
mobilizing the Nation's full productive capacity, (2) to be in the interest of war or national
defense programs, (3) to be in the interest of assuring that a fair proportion of the total purchases
and contracts for property and services for the Government in each industry category are placed
with small-business concerns, or (4) to be in the interest of assuring that a fair proportion of the
total sales of Government property be made to small-business concerns; but nothing contained in
this Act shall be construed to change any preferences or priorities established by law with respect
to the sale of electrical power or other property by the Government or any agency thereof. These
determinations may be made for individual awards or contracts or for classes of awards or
contracts. If a proposed procurement includes in its statement of work goods or services
currently being performed by a small business, and if the proposed procurement is in a quantity
or estimated dollar value the magnitude of which renders small business prime contract
participation unlikely, or if a proposed procurement for construction seeks to package or
consolidate discrete construction projects, or the solicitation involves an unnecessary or
unjustified bundling of contract requirements, as determined by the Administration, the
Procurement Activity shall provide a copy of the proposed procurement to the Procurement
Activity's Small Business Procurement Center Representative at least 30 days prior to the
solicitation's issuance along with a statement explaining (1) why the proposed acquisition cannot
be divided into reasonably small lots (not less than economic production runs) to permit offers
on quantities less than the total requirement, (2) why delivery schedules cannot be established on
a realistic basis that will encourage small business participation to the extent consistent with the
actual requirements of the Government, (3) why the proposed acquisition cannot be offered so as
to make small business participation likely, (4) why construction cannot be procured as separate
discrete projects, or (5) why the agency has determined that the bundled contract (as defined in
section 3(o)) is necessary and justified. The thirty-day notification process shall occur
concurrently with other processing steps required prior to issuance of the solicitation. Within 15
days after receipt of the proposed procurement and accompanying statement, if the Procurement

142

SMALL BUSINESS ACT

Center Representative believes that the procurement as proposed will render small business
prime contract participation unlikely, the Representative shall recommend to the Procurement
Activity alternative procurement methods which would increase small business prime
contracting opportunities. Whenever the Administration and the contracting procurement agency
fail to agree, the matter shall be submitted for determination to the Secretary or the head of the
appropriate department or agency by the Administrator. For purposes of clause (3) of the first
sentence of this subsection, an industry category is a discrete group of similar goods and
services. Such groups shall be determined by the Administration in accordance with the
definition of a “United States industry” under the North American Industry Classification
System, as established by the Office of Mana gement and Budget, except that the Administration
shall limit such an industry category to a greater extent than provided under such classification
codes if the Administration receives evidence indicating that further segmentation for purposes
of this paragraph is warranted due to special capital equipment needs or special labor or
geographic requirements or to recognize a new industry. A market for goods or services may not
be segmented under the preceding sentence due to geographic requirements unless the
Government typically designates the area where work for contracts for such goods or services is
to be performed and Government purchases comprise the major portion of the entire domestic
market for such goods or services and, due to the fixed location of facilities, high mobilization
costs, or similar economic factors, it is unreasonable to expect competition from business
concerns located outside of the general areas where such concerns are located. A contract may
not be awarded under this subsection if the award of the contract would result in a cost to the
awarding agency which exceeds a fair market price.
(b)
With respect to any work to be performed the amount of which would exceed the
maximum amount of any contract for which a surety may be guaranteed against loss under
section 411 of the Small Business Investment Act of 1958 (15 U.S.C. 694 (b)), the contracting
procurement agency shall, to the extent practicable, place contracts so as to allow more than one
small business concern to perform such work.
(c)

(1)

As used in this subsection:

(A)
The term "Committee" means the Committee for Purchase from
the Blind and Other Severely Handicapped established under the first section of the Act entitled
"An Act to create a Committee on Purchases of Blind- made Products, and for other purposes",
approved June 25, 1938 (41 U.S.C. 46).
(B)
The term "public or private organization for the handicapped" has
the same meaning given such term in section 3(e).
(C)
such term in section 3(f).

The term "handicapped individual" has the same meaning given

(2)
(A)
During fiscal year 1995, public or private organizations for the
handicapped shall be eligible to participate in programs authorized under this section in an
aggregate amount not to exceed $40,000,000.

143

SMALL BUSINESS ACT

(B)
None of the amounts authorized for participation by subparagraph
(A) may be placed on the procurement list maintained by the Committee pursuant to section 2 of
the Act entitled "An Act to create a Committee on Purchases of Blind- made Products, and for
other purposes", approved June 25, 1938 (41 U.S.C. 47).
(3)

The Administrator shall monitor and evaluate such participation.

(4)
(A)
Not later than ten days after the announcement of a proposed
award of a contract by an agency or department to a public or private organization for the
handicapped, a for-profit small business concern that has experienced or is likely to experience
severe economic injury as the result of the proposed award may file an appeal of the proposed
award with the Administrator.
(B)
If such a concern files an appeal of a proposed award under
subparagraph (A) and the Administrator, after consultation with the Executive Director of the
Committee, finds that the concern has experienced or is likely to experience severe economic
injury as the result of the proposed award, not later than thirty days after the filing of the appeal,
the Administration shall require each agency and department having procurement powers to take
such action as may be appropriate to alleviate economic injury sustained or likely to be sustained
by the concern.
(5)
Each agency and department having procurement powers shall report to
the Office of Federal Procurement Policy each time a contract subject to paragraph (2)(A) is
entered into, and shall include in its report the amount of the next higher bid submitted by a
for-profit small business concern. The Office of Federal Procurement Policy shall collect data
reported under the preceding sentence through the Federal procurement data system and shall
report to the Administration which shall notify all such agencies and departments when the
maximum amount of awards authorized under paragraph (2)(A) has been made during any fiscal
year.
(6)
For the purpose of this subsection, a contract may be awarded only if at
least 75 per centum of the direct labor performed on each item being produced under the contract
in the sheltered workshop or performed in providing each type of service under the contract by
the sheltered workshop is performed by handicapped individuals.
(7)
Agencies awarding one or more contracts to such an organization pursuant
to the provisions of this subsection may use multiyear contracts, if appropriate.
(d)
For purposes of this section priority shall be given to the awarding of contracts
and the placement of subcontracts to small business concerns which shall perform a substantial
proportion of the production on those contracts and subcontracts within areas of concentrated
unemployment or underemployment or within labor surplus areas. Notwithstanding any other
provision of law, total labor surplus area set-asides pursuant to Defense Manpower Policy
Number 4 (32A C.F.R. Chapter 1) or any successor policy shall be authorized if the Secretary or
his designee specifically determines tha t there is a reasonable expectation that offers will be
obtained from a sufficient number of eligible concerns so that awards will be made at reasonable

144

SMALL BUSINESS ACT

prices. As soon as practicable and to the extent possible, in determining labor surplus areas,
consideration shall be given to those persons who would be available for employment were
suitable employment available. Until such definition reflects such number, the present criteria of
such policy shall govern.
(e)

PROCUREMENT STRATEGIES; CONTRACT BUNDLING—

(1)
IN GENERAL.—To the maximum extent practicable, procurement
strategies used by the various agencies having contracting authority shall facilitate the maximum
participation of small business concerns as prime contractors, subcontractors, and suppliers.
(2)

MARKET RESEARCH—

(A)
IN GENERAL.—Before proceeding with an acquisition strategy
that could lead to a contract containing consolidated procurement requirements, the head of an
agency shall conduct market research to determine whether consolidation of the requirements is
necessary and justified.
(B)
FACTORS.—For purposes of subparagraph (A), consolidation of
the requirements may be determined as being necessary and justified if, as compared to the
benefits that would be derived from contracting to meet those requirements if not consolidated,
the Federal Government would derive from the consolidation measurably substantial benefits,
including any combination of benefits that, in combination, are measurably substantial. Benefits
described in the preceding sentence may include the following:
(i)

Cost savings.

(ii)

Quality improvements.

(iii)

Reduction in acquisition cycle times.

(iv)

Better terms and conditions.

(v)

Any other benefits.

(C)
REDUCTION OF COSTS NOT DETERMINATIVE.—The
reduction of administrative or personnel costs alone shall not be a justification for bundling of
contract requirements unless the cost savings are expected to be substantial in relation to the
dollar value of the procurement requirements to be consolidated.
(3)
STRATEGY SPECIFICATIONS.—If the head of a contracting agency
determines that a proposed procurement strategy for a procurement involves a substantial
bundling of contract requirements, the proposed procurement strategy shall—
(A)
identify specifically the benefits anticipated to be derived from the
bundling of contract requirements;

145

SMALL BUSINESS ACT

(B)
set forth an assessment of the specific impediments to participation
by small business concerns as prime contractors that result from the bundling of contract
requirements and specify actions designed to maximize small business participation as
subcontractors (including suppliers) at various tiers under the contract or contracts that are
awarded to meet the requirements; and
(C)
include a specific determination that the anticipated benefits of the
proposed bundled contract justify its use.
(4)
CONTRACT TEAMING.—In the case of a solicitation of offers for a
bundled contract that is issued by the head of an agency, a small business concern may submit an
offer that provides for use of a particular team of subcontractors for the performance of the
contract. The head of the agency shall evaluate the offer in the same manner as other offers, with
due consideration t the capabilities of all of the proposed subcontractors. If a small business
concern teams under this paragraph, it shall not affect its status as a small business concern for
any other purpose.
(f)

[deleted].

(g)
(1)
The President shall annually establish Government-wide goals for
procurement contracts awarded to small business concerns, small business concerns owned and
controlled by service disabled veterans, qualified HUBZone small business concerns, small
business concerns owned and controlled by socially and economically disadvantaged individuals,
and small business concerns owned and controlled by women. The Government-wide goal for
participation by small business concerns shall be established at not less than 23 percent of the
total value of all prime contract awards for each fiscal year. The Government-wide goal for
participation by small business concerns owned and controlled by service-disabled veterans shall
be established at not less than 3 percent of the total value of all prime contract and subcontract
awards for each fiscal year. The Government-wide goal for participation by qualified HUBZone
small business concerns shall be established at not less than 1 percent of the total value of all
prime contract awards for fiscal year 1999, not less than 1.5 percent of the total value of all
prime contract awards for fiscal year 2000, not less than 2 percent of the total value of all prime
contract awards for fiscal year 2001, not less than 2.5 percent of the total value of all prime
contract awards for fiscal year 2002, and not less than 3 percent of the total value of all prime
contract awards for fiscal year 2003 and each fiscal year thereafter. The Government-wide goal
for participation by small business concerns owned and controlled by socially and economically
disadva ntaged individuals shall be established at not less than 5 percent of the total value of all
prime contract and subcontract awards for each fiscal year. The Government-wide goal for
participation by small business concerns owned and controlled by women shall be established at
not less than 5 percent of the total value of all prime contract and subcontract awards for each
fiscal year. Notwithstanding the Government-wide goal, each agency shall have an annual goal
that presents, for that agency, the maximum practicable opportunity for small business concerns,
small business concerns owned and controlled by service-disabled veterans, qualified HUBZone
small business concerns, small business concerns owned and controlled by socially and
economically disadvantaged individuals, and small business concerns owned and controlled by

146

SMALL BUSINESS ACT

women to participate in the performance of contracts let by such agency. The Administration
and the Administrator of the Office of Federal Procurement Policy shall, when exercising their
authority pursuant to paragraph (2), insure that the cumulative annual prime contract goals for all
agencies meet or exceed the annual Government-wide prime contract goal established by the
President pursuant to this paragraph.
(2)
The head of each Federal agency shall, after consultation with the
Administration, establish goals for the participation by small business concerns, by small
business concerns owned and controlled by service-disabled veterans, by qualified HUBZone
small business concerns, by small business concerns owned and controlled by socially and
economically disadvantaged individuals, and by small business concerns owned and controlled
by women in procurement contracts of such agency having a value of $25,000 or more. Goals
established under this subsection shall be jointly established by the Administration and the head
of each Federal agency and shall realistically reflect the potential of small business concerns,
small business concerns owned and controlled by service-disabled veterans, qualified HUBZone
small business concerns, and small business concerns owned and controlled by socially and
economically disadvantaged individuals to perform such contracts and to perform subcontracts
under such contracts. Whenever the Administration and the head of any Federal agency fail to
agree on established goals, the disagreement shall be submitted to the Administrator of the
Office of Federal Procurement Policy for final determination. For the purpose of establishing
goals under this subsection, the head of each Federal agency shall make consistent efforts to
annually expand participation by small business concerns from each industry category in
procurement contracts of the agency, including participation by small business concerns owned
and controlled by service-disabled veterans, by qualified HUBZone small business concerns, by
small business concerns owned and controlled by socially and economically disadvantaged
individuals and by small business concerns owned and controlled by women. The head of each
Federal agency, in attempting to attain such participation, shall consider—
(A)

contracts awarded as the result of unrestricted competition; and

(B)
contracts awarded after competition restricted to eligible small
business concerns under this section and under the program established under section 8(a).
(h)
(1)
At the conclusion of each fiscal year, the head of each Federal agency
shall report to the Administration on the extent of participation by small business concerns, small
business concerns owned and controlled by veterans (including service-disabled veterans),
qualified HUBZone small business concerns, small business concerns owned and controlled by
socially and economically disadvantaged individuals, and small business concerns owned and
controlled by women in procurement contracts of such agency. Such reports shall contain
appropriate justifications for failure to meet the goals established under subsection (g) of this
section.
(2)
The Administration shall annually compile and analyze the reports
submitted by the individual agencies pursuant to paragraph (1) and shall submit them to the
President and the Congress. The Administration's submission to the President shall include the
following:

147

SMALL BUSINESS ACT

(A)
The Government-wide goals for participation by small business
concerns, small business concerns owned and controlled by service-disabled veterans, qualified
HUBZone small business concerns, small business concerns owned and controlled by socially
and economically disadvantaged individuals, and small business concerns owned and controlled
by women and the performance in attaining such goals.
(B)
in attaining such goals.

The goals in effect for each agency and the agency's performance

(C)
An analysis of any failure to achieve the Government-wide goals
or any individual agency goals and the actions planned by such agency (and approved by the
Administration) to achieve the goals in the succeeding fiscal year.
(D)
The number and dollar value of contracts awarded to small
business concerns, small business concerns owned and controlled by service-disabled veterans,
qualified HUBZone small business concerns, small business concerns owned and controlled by
socially and economically disadvantaged individuals and small business concerns owned and
controlled by women through—
(i)

noncompetitive negotiation,

(ii)
competition restricted to small business concerns owned
and controlled by socially and economically disadvantaged individuals,
(iii)

competition restricted to small business concerns, and

(iv)

unrestricted competitions,

for each agency and on a Government-wide basis.
(E)
The number and dollar value of subcontracts awarded to small
business concerns, small business concerns owned and controlled by service-disabled veterans,
qualified HUBZone small business concerns, small business concerns owned and controlled by
socially and economically disadvantaged individuals and small business concerns owned and
controlled by women.
(F)
The number and dollar value of prime contracts and subcontracts
awarded to small business concerns owned and controlled by women.
(3)
The President shall include the information required by paragraph (2) in
each annual report to the Congress on the state of small business prepared pursuant to section
303(a) of the Small Business Economic Policy Act of 1980 (15 U.S.C. 631b(a)).
(i)
Nothing in this Act or any other provision of law precludes exclusive small
business set-asides for procurements of architectural and engineering services, research,

148

SMALL BUSINESS ACT

development, test and evaluation, and each Federal agency is authorized to develop such
set-asides to further the interests of small business in those areas.
(j)
(1)
Each contract for the purchase of goods and services that has an
anticipated value greater than $2,500 but not greater than $100,000 shall be reserved exclusively
for small business concerns unless the contracting officer is unable to obtain offers from two or
more small business concerns that are competitive with market prices and are competitive with
regard to the quality and delivery of the goods or services being purchased.
(2)
in carrying out paragraph (1), a contracting officer shall consider a
responsive offer timely received from an eligible small business offeror.
(3)
Nothing in paragraph (1) shall be construed as precluding an award of a
contract with a value not greater than $100,000 under the authority of subsection (a) of section 8
of this Act, section 2323 of title 10, United States Code, section 712 of the Business Opportunity
Development Reform Act of 1988 (Public Law 100-656; 15 U.S.C. 644 note), or section 7102 of
the Federal Acquisition Streamlining Act of 1994.
(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—
(1)
be known as the "Director of Small and Disadvantaged Business
Utilization" for such agency,
(2)

be appointed by the head of such agency,

(3)
be responsible only to, and report directly to, the head of such agency or to
the deputy of such head, except that the director for the Office of the Secretary of Defense shall
be responsible only to, and report to, such Secretary or the Secretary's designee,
(4)
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,
(5)
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 business concerns to obtain payments, late payment interest
penalties, or information 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

149

SMALL BUSINESS ACT

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 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,
(8)
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
(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,
(9)
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
(10) make recommendations to contracting officers as to whether a particular
contract requirement should be awarded pursuant to subsection (a), or section 8(a) of this Act or
section 2323 of title 10, United States Code. Such recommendations 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.
This subsection shall not apply to the Administration.
(l)
(1)
The Administration shall assign to each major procurement center a
breakout procurement center representative with such assistance as may be appropriate. The
breakout procurement center representative shall carry out the activities described in paragraph
(2), and shall be an advocate for the breakout of items for procurement through full and open
competition, whenever appropriate, while maintaining the integrity of the system in which such
items are used, and an advocate for the use of full and open competition, whenever appropriate,
for the procurement of supplies and services by such center. Any breakout procurement center
representative assigned under this subsection shall be in addition to the representative referred to
in subsection (k)(6).
(2)
In addition to carrying out the responsibilities assigned by the
Administration, a breakout procurement center representative is authorized to -(A)
attend any provisioning conference or similar evaluation session
during which determinations are made as to whether requirements are to be procured through

150

SMALL BUSINESS ACT

other than full and open competition and make recommendations with respect to such
requirements to the members of such conference or session;
(B)
review, at any time, restrictions on competition previously imposed
on items through acquisition method coding or similar procedures, and recommend to personnel
of the appropriate activity the prompt reevaluation of such limitations;
(C)
review restrictions on competition arising out of restrictions on the
rights of the United States in technical data, and, when appropriate, recommend that personnel of
the appropriate activity initiate a review of the validity of such an asserted restriction;
(D)
obtain from any governmental source, and make available to
personnel of the appropriate activity, technical data necessary for the preparation of a
competitive solicitation package for any item of supply or service previously procured
noncompetitively due to the unavailability of such technical data;
(E)
have access to procurement records and other data of the
procurement center commensurate with the level of such representative's approved security
clearance classification;
(F)
receive unsolicited engineering proposals and, when appropriate (i)
conduct a value analysis of such proposal to determine whether such proposal, if adopted, will
result in lower costs to the United States without substantially impeding legitimate acquisition
objectives and forward to personnel of the appropriate activity recommendations with respect to
such proposal, or (ii) forward such proposals without analysis to personnel of the activity
responsible for reviewing such proposals and who shall furnish the breakout procurement center
representative with information regarding the disposition of any such proposal; and
(G)
review the systems that account for the acquisition and
management of technical data within the procurement center to assure that such systems provide
the maximum availability and access to data needed for the preparation of offers to sell to the
United States those supplies to which such data pertain which potential offerors are entitled to
receive.
(3)
A breakout procurement center representative is authorized to appeal the
failure to act favorably on any recommendation made pursuant to paragraph (2). Such appeal
shall be filed and processed in the same manner and subject to the same conditions and
limitations as an appeal filed by the Administrator pursuant to subsection (a).
(4)
The Administration shall assign and co- locate at least two small business
technical advisers to each major procurement center in addition to such other advisers as may be
authorized from time to time. The sole duties of such advisers shall be to assist the breakout
procurement center representative for the center to which such advisers are assigned in carrying
out the functions described in paragraph (2) and the representatives referred to in subsection
(k)(6).

151

SMALL BUSINESS ACT

(5)
(A)
The breakout procurement center representatives and technical
advisers assigned pursuant to this subsection shall be—
(i)

full-time employees of the Administration; and

(ii)
fully qualified, technically trained, and familiar with the
supplies and services procured by the major procurement center to which they are assigned.
(B)
In addition to the requirements of subparagraph (A), each breakout
procurement center representative, and at least one technical adviser assigned to such
representative, shall be an accredited engineer.
(C)
The Administration shall establish personnel positions for breakout
procurement representatives and advisers assigned pursuant to this subsection which are
classified at a grade level of the General Schedule sufficient to attract and retain highly qualified
personnel.
(6)
For purposes of this subsection, the term "major procurement center"
means a procurement center that, in the opinion of the Administrator, purchases substantial
dollar amounts of other than commercial items and which has the potential to incur significant
savings as the result of the placement of a breakout procurement center representative.
(7)
(A)
At such times as the Administrator deems appropriate, the breakout
procurement center representative shall conduct familiarization sessions for contracting officers
and other appropriate personnel of the procurement center to which such representative is
assigned. Such sessions shall acquaint the participants with the provisions of this subsection and
shall instruct them in methods designed to further the purposes of such subsection.
(B)
The breakout procurement center representative shall prepare and
personally deliver an annual briefing and report to the head of the procurement center to which
such representative is assigned. Such briefing and report shall detail the past and planned
activities of the representative and shall contain such recommendations for improvement in the
operation of the center as may be appropriate. The head of such center shall personally receive
such briefing and report and shall, within sixty calendar days after receipt, respond, in writing, to
each recommendation made by such representative.
(m)
(1)
Each agency subject to the requirements of section 2323 of title 10, United
States Code, shall, when implementing such requirements—
(A)
establish policies and procedures that insure that there will be no
reduction in the number of dollar value of contracts awarded pursuant to this section and section
8(a) in order to achieve any goal or other program objective; and
(B)
assure that such requirements will not alter or change the
procurement process used to implement this section or section 8(a).

152

SMALL BUSINESS ACT

(2)
All procurement center representatives (including those referred to in
subsection (k)(6)), in addition to such other duties as may be assigned by the Administrator,
shall—
(A)
monitor the performance of the procurement activities to which
they are assigned to ascertain the degree of compliance with the requirements of paragraph (l);
(B)
report to their immediate supervisors all instances of
noncompliance with such requirements; and
(C)
increase, insofar as possible, the number and dollar value of
procurements that may be used for the programs established under this section, section 8(a), and
section 2323 of title 10, United States Code.
(n)
For purposes of this section, the determination of labor surplus areas shall be
made on the basis of the criteria in effect at the time of the determination, except that any
minimum population criteria shall not exceed twenty-five thousand. Such determination, as
modified by the preceding sentence, shall be made by the Secretary of Labor.
(o)
(1)
A concern may not be awarded a contract under subsection (a) as a small
business concern unless the concern agrees that—
(A)
in the case of a contract for services (except construction), at least
50 percent of the cost of contract performance incurred for personnel shall be expended for
employees of the concern; and
(B)
in the case of a contract for procurement of supplies (other than
procurement from a regular dealer in such supplies), the concern will perform work for at least
50 percent of the cost of manufacturing the supplies (not including the cost of materials).
(2)
The Administrator may change the percentage under subparagraph (A) or
(B) of paragraph (1) 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.
(3)
The Administration 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 (2).
(p)
DATABASE, ANALYSIS, AND ANNUAL REPORT WITH RESPECT TO
BUNDLED CONTRACTS.—
(1)
BUNDLED CONTRACT DEFINED.—In this subsection, the term
“bundled contract” has the meaning given such term in section 3(o)(1).

153

SMALL BUSINESS ACT

(2)

DATABASE.—

(A)
IN GENERAL.—Not later than 180 days after the date of the
enactment of this subsection, the Administrator of the Small Business Administration shall
develop and shall thereafter maintain a database containing data and information regarding—
(i)

each bundled contract awarded by a Federal agency; and

(ii)
each small business concern that has been displaced as a
prime contractor as a result of the award of such a contract.
(3)
ANALYSIS.—For each bundled contract that is to be recompeted as a
bundled contract, the Administrator shall determine—
(A)
the amount of savings and benefits (in accordance with subsection
(e)) achieved under the bundling of contract requirements; and
(B)
whether such savings and benefits will continue to be realized if
the contract remains bundled, and whether such savings and benefits would be greater if the
procurement requirements were divided into separate solicitations suitable for award to small
business concerns.
(4)

ANNUAL REPORT ON CONTRACT BUNDLING.—

(A)
IN GENERAL.—Not later than 1 year after the date of the
enactment of this paragraph, and annually in March thereafter, the Administration shall transmit
a report on contract bundling to the Committees on Small Business of the House of
Representatives and the Senate.
(B)

CONTENTS.—Each report transmitted under subparagraph (A)

shall include—
(i)
data on the number, arranged by industrial classification, of
small business concerns displaced as prime contractors as a result of the award of bundled
contracts by Federal agencies; and
(ii)
a description of the activities with respect to previously
bundled contracts of each Federal agency during the preceding year, including—
(I)
data on the number and total dollar amount of all
contract requirements that were bundled; and
(II)

with respect to each bundled contract, data or

information on—

154

SMALL BUSINESS ACT

(aa)

the justification for the bundling of contract

requirements;
(bb) the cost savings realized by bundling the
contract requirements over the life of the contract;
(cc) the extent to which maintaining the bundled
status of contract requirements is projected to result in continued cost savings;
(dd) the extent to which the bundling of contract
requirements complied with the contracting agency’s small business subcontracting plan,
including the total dollar value awarded to small business concerns as subcontractors and the
total dollar value previously awarded to small business concerns as prime contractors; and
(ee) the impact of the bundling of contract
requirements on small business concerns unable to compete as prime contractors for the
consolidated requirements and on the industries of such small business concerns, including a
description of any changes to the proportion of any such industry that is composed of small
business concerns.
(5)

ACCESS TO DATA.—

(A)
FEDERAL PROCUREMENT DATA SYSTEM.—To assist in the
implementation of this section, the Administration shall have access to information collected
through the Federal Procurement Data System.
(B)
AGENCY PROCUREMENT DATA SOURCES.—To assist in the
implementation of this section, the head of each contracting agency shall provide, upon request
of the Administration, procurement information collected through existing agency data collection
sources.
§ 16. (a)
Whoever makes any statement knowing it to be false, or whoever willfully
overvalues any security, for the purpose of obtaining for himself or for any applicant any loan, or
extension thereof by renewal, deferment of action, or otherwise, or the acceptance, release, or
substitution of security therefor, or for the purpose of influencing in any way the action of the
Administration, or for the purpose of obtaining money, property, or anything of value, under this
Act, shall be punished by a fine of not more than $5,000 or by imprisonment for not more than
two years, or both.
(b)
Whoever, being connected in any capacity with the Administration, (1)
embezzles, abstracts, purloins, or willfully misapplies any moneys, funds, securities, or other
things of value, whether belonging to it or Pledged or otherwise entrusted to it, or (2) with intent
to defraud the Administration or any other body politic or corporate, or any individual, or to
deceive any officer, auditor, or examiner of the Administration makes any false entry in any
book, report, or statement of or to the Administration, or without being duly authorized, draws
any order or issues, puts forth, or assigns any note, debenture, bond, or other obligation, or draft,

155

SMALL BUSINESS ACT

bill of exchange, mortgage, judgment, or decree thereof, or (3) with intent to defraud participates
or shares in or receives directly or indirectly any money, profit, property, or benefit through any
transaction, loan, commission, contract, or any other act of the Administration, or (4) gives any
unauthorized information concerning any future action or Plan of the Administration which
might affect the value of securities, or, having such knowledge, invests or speculates, directly or
indirectly, in the securities or property of any company or corporation receiving loans or other
assistance from the Administration, shall be punished by a fine of not more than $10,000 or by
imprisonment for not more than five years, or both.
(c)
Whoever, with intent to defraud, knowingly conceals, removes, disposes of, or
converts to his own use or to that of another, any property mortgaged or Pledged to, or held by,
the Administration, shall be fined not more than $5,000 or imprisoned not more than five years,
or both; but if the value of such property does not exceed $100, he shall be fined not more than
$1,000 or imprisoned not more than one year, or both.
(d)
(1)
Whoever misrepresents the status of any concern or person as a “small
business concern”, a “qualified HUBZone small business concern”, a "small business concern
owned and controlled by socially and economically disadvantaged individuals" or a “small
business concern[s] owned and controlled by women”, in order to obtain for oneself or another
any—
(A)

prime contract to be awarded pursuant to section 9, 15, or 31;

(B)

subcontract to be awarded pursuant to section 8(a);

(C)
subcontract that is to be included as part or all of a goal contained
in a subcontracting Plan required pursuant to section 8(d); or
(D)
prime or subcontract to be awarded as a result, or in furtherance, of
any other provision of Federal law that specifically references section 8(d) for a definition of
program eligibility, shall be subject to the penalties and remedies described in paragraph (2).
(2)

Any person who violates paragraph (1) shall—

(A)
be punished by a fine of no t more than $500,000 or by
imprisonment for not more than 10 years, or both;
(B)
be subject to the administrative remedies prescribed by the
Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801-3812);
(C)
be subject to suspension and debarment as specified in subpart 9.4
of title 48, Code of Federal Regulations (or any successor regulation) on the basis that such
misrepresentation indicates a lack of business integrity that seriously and directly affects the
present responsibility to perform any contract awarded by the Federal Government or a
subcontract under such a contract; and

156

SMALL BUSINESS ACT

(D)
be ineligible for participation in any program or activity conducted
under the authority of this Act or the Small Business Investment Act of 1958 (15 U.S.C. 661 et
seq.) for a period not to exceed 3 years.
(e)
Any representation of the status of any concern or person as a "small business
concern", a “HUBZone small business concern”, a "small business concern owned and
controlled by socially and economically disadvantaged individuals", or a "small business
concern[s] owned and controlled by women" in order to obtain any prime contract or subcontract
enumerated in subsection (d) of this section shall be in writing.
(f)
Whoever falsely certifies past compliance with the requirements of section
7(j)(10)(I) of this Act shall be subject to the penalties prescribed in subsection (d).
§ 17. Any interest held by the Administration in property, as security for a loan, shall be
subordinate to any lien on such property fo r taxes due on the property to a State, or political
subdivision thereof, in any case where such lien would, under applicable State law, be superior to
such interest if such interest were held by any party other than the United States.
§ 18. (a)
The Administration shall not duplicate the work or activity of any other
department or agency of the Federal Government and nothing contained in this Act shall be
construed to authorize any such duplication unless such work or activity is expressly provided
for in this Act. If loan applications are being refused or loans denied by such other department
or agency responsible for such work or activity due to administrative withholding from
obligation or withholding from apportionment, or due to administratively declared moratorium,
then, for purposes of this section, no duplication shall be deemed to have occurred.
(b)

As used in this Act—

(1)
"agricultural enterprises" means those businesses engaged in the
production of food and fiber, ranching, and raising of livestock, aquaculture, and all other
farming and agricultural related industries; and
(2)
"credit elsewhere" means the availability of sufficient credit from
non-Federal sources at reasonable rates and terms, taking into consideration prevailing private
rates and terms in the community in or near where the concern transacts business for similar
purposes and periods of time.
§ 19. If any provision of this Act, or the application thereof to any person or circumstances, is
held invalid, the remainder of this Act, and the application of such provision to other persons or
circumstances, shall not be affected thereby.
§ 20. (a)
(1)
For fiscal year 2000 and each fiscal year thereafter, there are authorized to
be appropriated such sums as may be necessary and appropriate, to remain available until
expended, and to be available solely—

157

SMALL BUSINESS ACT

(A)
to carry out the Small Business Development Center Program
under section 21, but not to exceed the annual funding level, as specified in section 21(a);
(B)
to pay the expenses of the National Small Business Development
Center Advisory Board, as provided in section 21(i);
(C)

to pay the expenses of the information sharing system, as provided

in section 21(c)(8);
(D)
to pay the expenses of the association referred to in section
21(a)(3)(A) for conducting the accreditation program, as provided in section 21(k)(2); and
(E)
to pay the expenses of the Administration, including salaries of
examiners, for conducting examinations as part of the accreditation program conducted by the
association referred to in section 21(a)(3)(A).
(F)
or directed by Congress.

to pay for small business development center grants as mandated

(2)
Notwithstanding any other provision of law, the Administration shall enter
into commitments for direct loans and to guarantee loans, debentures, payment of rentals, or
other amounts due under qualified contracts and other types of financial assistance and enter into
commitments to purchase debentures and preferred securities and to guarantee sureties against
loss pursuant to programs under this Act and the Small Business Investment Act of 1958, in the
full amounts provided by law subject only to (A) the availability of qualified applications, and
(B) limitations contained in appropriations Acts. Nothing in this paragraph authorizes the
Administration to reduce or limit its authority to enter into such commitments. Subject to
approval in appropriations Acts, amounts authorized for preferred securities, debentures or
participating securities under title III of the Small Business Investment Act of 1958 may be
obligated in one fiscal year and disbursed or guaranteed in any 1 or more of the 4 subsequent
fiscal years.
(3)
There are authorized to be transferred from the disaster loan revolving
fund such sums as may be necessary and appropriate for administrative expenses of the
Administration.
(4)
Except as may be otherwise specifically provided by law, the amount of
deferred participation loans authorized in this section—
(A)
shall mean the net amount of the loan principal guaranteed by the
Small Business Administration (and does not include any amount which is not guaranteed); and
(B)
shall be available for a national program, except that the
Administration may use not more than an amount equal to 10 percent of the amount authorized
each year for any special or pilot program directed to identified sectors of the small business
community or to specific geographic regions of the United States.

158

SMALL BUSINESS ACT

(b)
There are authorized to be appropriated to the Administration for fiscal year 1991
such sums as may be necessary to carry out the provisions of this Act and the Small Business
Investment Act of 1958. There also are hereby authorized to be appropriated such sums as may
be necessary and appropriate for the carrying out of the provisions and purposes, including
administrative, of sections 7(b)(1) and 7(b)(2) of this Act; and there are authorized to be
transferred from the disaster loan revolving fund such sums as may be necessary and appropriate
for such administrative expenses.
(c)
DISASTER MITIGATION PILOT PROGRAM.—The following program levels
are authorized for loans under section 7(b)(1)(C):

(d)

(1)

$15,000,000 for fiscal year 2005.

(2)

$15,000,000 for fiscal year 2006.

FISCAL YEAR 2005.—

(1)
fiscal year 2005:

PROGRAM LEVELS.—The following program levels are authorized for

(A)

For the programs authorized by this Act, the Administration is

authorized to make—
(i)

$75,000,000 in technical assistance grants, as provided in

(ii)

$105,000,000 in direct loans, as provided in 7(m).

section 7(m); and

(B)
For the programs authorized by this Act, the Administration is
authorized to make $23,050,000,000 in deferred participation loans and other financings. Of
such sum, the Administration is authorized to make—
(i)

$16,500,000,000 in general business loans, as provided in

section 7(a);
(ii)
$6,000,000,000 in certified development company
financings, as provided in section 7(a)(13) and as provided in section 504 of the Small Business
Investment Act of 1958;
(iii)

$500,000,000 in loans, as provided in section 7(a)(21); and

(iv)

$50,000,000 in loans, as provided in section 7(m).

(C)
For the programs authorized by title III of the Small Business
Investment Act of 1958, the Administration is authorized to make—

159

SMALL BUSINESS ACT

(i)

$4,250,000,000 in purchases of participating securities; and

(ii)

$3,250,000,000 in guarantees of debentures.

(D)
For the programs authorized by part B of title IV of the Small
Business Investment Act of 1958, the Administration is authorized to enter into guarantees not to
exceed $6,000,000,000, of which not more than 50 percent may be in bonds approved pursuant
to section 411(a)(3) of that Act.
(E)
The Administration is authorized to make grants or enter into
cooperative agreements for a total amount of $7,000,000 for the Service Corps of Retired
Executives program authorized by section 8(b)(1).
(2)

ADDITIONAL AUTHORIZATIONS.—

(A)
There are authorized to be appropriated to the Administration for
fiscal year 2005 such sums as may be necessary to carry out the provisions of this Act not
elsewhere provided for, including administrative expenses and necessary loan capital for disaster
loans pursuant to section 7(b), and to carry out the Small Business Investment Act of 1958,
including salaries and expenses of the Administration.
(B)

Notwithstanding any other provision of this paragraph, for fiscal

year 2005—
(i)
no funds are authorized to be used as loan capital for the
loan program authorized by section 7(a)(21) except by transfer from another Federal department
or agency to the Administration, unless the program level authorized for general business loans
under paragraph (1)(B)(i) is fully funded; and
(ii)
the Administration may not approve loans on its own
behalf or on behalf of any other Federal department or agency, by contract or otherwise, under
terms and conditions other than those specifically authorized under this Act or the Small
Business Investment Act of 1958, except that it may approve loans under section 7(a)(21) of this
Act in gross amounts of not more than $2,000,000.
(e)

FISCAL YEAR 2006.—

(1)
fiscal year 2006:

PROGRAM LEVELS.—The following program levels are authorized for

(A)

For the programs authorized by this Act, the Administration is

authorized to make—
(i)

$80,000,000 in technical assistance grants, as provided in

section 7(m); and

160

SMALL BUSINESS ACT

(ii)

$110,000,000 in direct loans, as provided in 7(m).

(B)
For the programs authorized by this Act, the Administration is
authorized to make $25,050,000,000 in deferred participation loans and other financings. Of
such sum, the Administration is authorized to make—
(i)

$17,000,000,000 in general business loans, as provided in

section 7(a);
(ii)
$7,500,000,000 in certified development company
financings, as provided in section 7(a)(13) and as provided in section 504 of the Small Business
Investment Act of 1958;
(iii)

$500,000,000 in loans, as provided in section 7(a)(21); and

(iv)

$50,000,000 in loans, as provided in section 7(m).

(C)
For the programs authorized by title III of the Small Business
Investment Act of 1958, the Administration is authorized to make—
(i)

$4,500,000,000 in purchases of participating securities; and

(ii)

$3,500,000,000 in guarantees of debentures.

(D)
For the programs authorized by part B of title IV of the Small
Business Investment Act of 1958, the Administration is authorized to enter into guarantees not to
exceed $6,000,000,000, of which not more than 50 percent may be in bonds approved pursuant
to section 411(a)(3) of that Act.
(E)
The Administration is authorized to make grants or enter into
cooperative agreements for a total amount of $7,000,000 for the Service Corps of Retired
Executives program authorized by section 8(b)(1).
(2)

ADDITIONAL AUTHORIZATIONS.—

(A)
There are authorized to be appropriated to the Administration for
fiscal year 2006 such sums as may be necessary to carry out the provisions of this Act not
elsewhere provided for, including administrative expenses and necessary loan capital for disaster
loans pursuant to section 7(b), and to carry out the Small Business Investment Act of 1958,
including salaries and expenses of the Administration.
(B)

Notwithstanding any other provision of this paragraph, for fiscal

year 2006—

161

SMALL BUSINESS ACT

(i)
no funds are authorized to be used as loan capital for the
loan program authorized by section 7(a)(21) except by transfer from another Federal department
or agency to the Administration, unless the program level authorized for general business loans
under paragraph (1)(B)(i) is fully funded; and
(ii)
the Administration may not approve loans on its own
behalf or on behalf of any other Federal department or agency, by contract or otherwise, under
terms and conditions other than those specifically authorized under this Act or the Small
Business Investment Act of 1958, except that it may approve loans under section 7(a)(21) of this
Act in gross amounts of not more than $2,000,000.
[(f)—(i) deleted].
(j)
FISCAL YEAR 2004 PURCHASE AND GUARANTEE AUTHORITY UNDER
TITLE III OF SMALL BUSINESS INVESTMENT ACT OF 1958.—For fiscal year 2004, for
the programs authorized by title III of the Small Business Investment Act of 1958 (15 U.S.C. 681
et seq.), the Administration is authorized to make—
(1)

$4,000,000,000 in purchases of participating securities; and

(2)

$3,000,000,000 in guarantees of debentures.

§ 21. (a)
(1)
The Administration is authorized to make grants (including contracts and
cooperative agreements) to any State government or any agency thereof, any regional entity, any
State-chartered development, credit or finance corporation, any women’s business center
operating pursuant to section 29, any public or private institution of higher education, including
but not limited to any land- grant college or university, any college or school of business,
engineering, commerce, or agriculture, community college or junior college, or to any entity
formed by two or more of the above entities (herein referred to as "applicants") to assist in
establishing small business development centers and to any such body for: small business
oriented employment or natural resources development programs; studies, research, and
counseling concerning the managing, financing, and operation of small business enterprises;
management and technical assistance regarding small business participation in international
markets, export promotion and technology transfer, delivery or distribution of such services and
information; and providing access to business analysts who can refer small business concerns to
available experts: Provided, That after December 31, 1990, the Administration shall not make a
grant to any applicant other than an institution of higher education or a women’s business center
operating pursuant to section 29 as a Small Business Development Center unless the applicant
was receiving a grant (including a contract or cooperative agreement) on such date. The
Administration shall require any applicant for a small business development center grant with
performance commencing on or after January 1, 1992 to have its own budget and to primarily
utilize institutions of higher education and women’s business centers operating pursuant to
section 29 to provide services to the small business community. The term of such grants shall be
made on a calendar year basis or to coincide with the Federal fiscal year.

162

SMALL BUSINESS ACT

(2)
The Small Business Development Centers shall work in close cooperation
with the Administration's regional and local offices, the Department of Commerce, appropriate
Federal, State and local agencies and the small business community to serve as an active
information dissemination and service delivery mechanism for existing trade promotion, trade
finance, trade adjustment, trade remedy and trade data collection programs of particular utility
for small businesses.
(3)
The Small Business Development Center Program shall be under the
general management and oversight of the Administration, for the delivery of programs and
services to the small business community. Such programs and services shall be jointly
developed, negotiated, and agreed upon, with full participation of both parties, pursuant to an
executed cooperative agreement between the Small Business Development Center applicant and
the Administration.
(A)
Small business development centers are authorized to form an
association to pursue matters of common concern. If more than a majority of the small business
development centers which are operating pursuant to agreements with the
Administration are members of such an association, the Administration is authorized and
directed to recognize the existence and activities of such an association and to consult with it and
develop documents (i) announc ing the annual scope of activities pursuant to this section, (ii)
requesting proposals to deliver assistance as provided in this section and (iii) governing the
general operations and administration of the Small Business Development Center Program,
specifically including the development of regulations and a uniform negotiated cooperative
agreement for use on an annual basis when entering into individual negotiated agreements with
small business development centers.
(B)
Provisions governing audits, cost principles and administrative
requirements for Federal grants, contracts and cooperative agreements which are included in
uniform requirements of Office of Management and Budget (OMB) Circulars shall be
incorporated by reference and shall not be set forth in summary or other form in regulations.
(C)
On an annual basis, the Small Business Development Center shall
review and coordinate public and private partnerships and cosponsorships with the
Administration for the purpose of more efficiently leveraging available resources on a National
and a State basis.
(4)

SMALL BUSINESS DEVELOPMENT CENTER PROGRAM

LEVEL.—
(A)
IN GENERAL.—The Administration shall require as a condition
of any grant (or amendment or modification thereof) made to an applicant under this section, that
a matching amount (excluding any fees collected from recipients of such assistance) equal to the
amount of such grant be provided from sources other than the Federal Government, to be
comprised of not less than 50 percent cash and not more than 50 percent of indirect costs and inkind contributions.

163

SMALL BUSINESS ACT

(B)
RESTRICTION.—The matching amount described in
subparagraph (A) shall not include any indirect costs or in-kind contributions derived from any
Federal program.
(C)

FUNDING FORMULA.—

(i)
IN GENERAL.—Subject to clause (iii), the amount of a
formula grant received by a State under this subparagraph shall be equal to an amount
determined in accordance with the following formula:
(I)
The annual amount made available under section
20(a) for the Small Business Development Center Program, less any reductions made for
expenses authorized by clause (v) of this subparagraph, shall be divided on a pro rata basis,
based on the percentage of the population of each State, as compared to the population of the
United States.
(II)
If the pro rata amount calculated under subclause (I)
for any State is less than the minimum funding level under clause (iii), the Administration shall
determine the aggregate amount necessary to achieve that minimum funding level for each such
State.
(III) The aggregate amount calculated under subclause
(II) shall be deducted from the amount calculated under subclause (I) for States eligible to
receive more than the minimum funding level. The deductio ns shall be made on a pro rata basis,
based on the population of each such State, as compared to the total population of all such States.
(IV) The aggregate amount deducted under subclause
(III) shall be added to the grants of those States that are not eligible to receive more than the
minimum funding level in order to achieve the minimum funding level for each such State,
except that the eligible amount of a grant to any State shall not be reduced to an amount below
the minimum funding level.
(ii)
GRANT DETERMINATION.—The amount of a grant that
a State is eligible to apply for under this subparagraph shall be the amount determined under
clause (i), subject to any modifications required under clause (iii), and shall be based on the
amount available for the fiscal year in which performance of the grant commences, but not
including amounts distributed in accordance with clause (iv). The amount of a grant received by
a State under any provision of this subparagraph shall not exceed the amount of matching funds
from sources other than the Federal Government, as required under subparagraph (A).
(iii)
MINIMUM FUNDING LEVEL.—The amount of the
minimum funding level for each State shall be determined for each fiscal year based on the
amount made available for that fiscal year to carry out this section, as follows:
(I)
If the amount made available is not less than
$81,500,000 and not more than $90,000,000, the minimum funding level shall be $500,000.

164

SMALL BUSINESS ACT

(II)
If the amount made available is less than
$81,500,000, the minimum funding level shall be the remainder of $500,000 minus a percentage
of $500,000 equal to the percentage amount by which the amount made available is less than
$81,500,000.
(III) If the amount available is more than $90,000,000,
the minimum funding level shall be the sum of $500,000 Plus a percentage of $500,000 equal to
the percentage amount by which the amount made available exceeds $90,000,000.
(iv)
DISTRIBUTIONS.—Subject to clause (iii), if any State
does not apply for, or use, its full funding eligibility for a fiscal year, the Administration shall
distribute the remaining funds as follows:
(I)
If the grant to any State is less than the amount
received by that State in Fiscal year 2000, the Administration shall distribute such remaining
funds, on a pro rata bases, based on the percentage of shortage of each such State, as compared
to the total amount of such remaining funds available, to the extent necessary in order to increase
the amount of the grant to the amount received by that State in fiscal year 2000, or until such
funds are exhausted, whichever first occurs.
(II)
If any funds remain after the application of
subclause (I), the remaining amount may be distributed as supplemental grants to any State, as
the Administration determines, in its discretion, to be appropriate, after consultation with the
association referred to in subsection (a)(3)(A).
(v)

USE OF AMOUNTS.

(I)
any fiscal year to carry out this section—

IN GENERAL.—Of the amounts made available in

(aa) not more than $500,000 may be used by the
Administration to pay expenses enumerated in subparagraphs (B) through (D) of section
20(a)(1); and
(bb) not more than $500,000 may be used by the
Administration to pay the exa mination expenses enumerated in section 20(a)(1)(E).
(II)
LIMITATION.—No funds described in subclause
(I) may be used for examination expenses under section 20(a)(1)(E) if the usage would reduce
the amount of grants made available under clause (i)(I) of this subparagraph to less than
$85,000,000 (after excluding any amounts provided in appropriations Acts, or accompanying
report language, for specific institutions or for purposes other than the general small business
development center program) or would further reduce the amount of such grants below such
amount.

165

SMALL BUSINESS ACT

(vi)
EXCLUSIONS.—Grants provided to a State by the
Administration or another Federal agency to carry out subsection (a)(6) or (c)(3)(G), or for
supplemental grants set forth in clause (iv)(II) of this subparagraph, shall not be included in the
calculation of maximum funding for a State under clause (ii) of this subparagraph.
(vii) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated to carry out this subparagraph—
(I)

$130,000,000 for fiscal year 2005; and

(II)

$135,000,000 for fiscal year 2006.

(viii) LIMITATION.—From the funds appropriated pursuant to
clause (vii), the Administration shall reserve not less than $1,000,000 in each fiscal year to
develop portable assistance for startup and sustainability non- matching grant programs to be
conducted by eligible small business development centers in communities that are economically
challenged as a result of a business or government facility down sizing or closing, which has
resulted in the loss of jobs or small business instability. A non-matching grant under this clause
shall not exceed $100,000, and shall be used for small business development center personnel
expenses and related small business programs and services.
(ix)
STATE DEFINED.—In this subparagraph, the term “State”
means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico,
the Virgin Islands, Guam, and American Samoa.
(5)

FEDERAL CONTRACTS WITH SMALL BUSINESS DEVELOPMENT

CENTERS.—
(A)
IN GENERAL.—Subject to the conditions set forth in
subparagraph (B), a small business development center may enter into a contract with a Federal
department or agency to provide specific assistance to small business concerns.
(B)
CONTRACT PREREQUISITES.—Before bidding on a contract
described in subparagraph (A), a small business development center shall receive approval from
the Associate Administrator of the small business development center program of the subject and
general scope of the contract. Each approval under subparagraph (A) shall be based upon a
determination that the contract will provide assistance to small business concerns and that
performance of the contract will not hinder the small business deve lopment center in carrying out
the terms of the grant received by the small business development center from the
Administration.
(C)
EXEMPTION FROM MATCHING REQUIREMENT.—A
contract under this paragraph shall not be subject to the matching funds or eligibility
requirements of paragraph (4).

166

SMALL BUSINESS ACT

(D)
ADDITIONAL PROVISION.—Notwithstanding any other
provision of law, a contract for assistance under this paragraph shall not be applied to any
Federal department or agency's small business, woman-owned business, or socially and
economically disadvantaged business contracting goal under section 15(g).
(6)
Any applicant which is funded by the Administration as a Small Business
Development Center may apply for an additional grant to be used solely to assist—
(A)

with the development and enhancement of exports by small

(B)

in technology transfer; and

business concerns;

(C)
with outreach, development, and enhancement of minority-owned
small business startups or expansions, HUBZone small business concerns, veteran-owned small
business startups or expansions, and women-owned small business startups or expansions, in
communities impacted by base closings or military or corporate downsizing, or in rural or
underserved communities;
as provided under subparagraphs (B) through (G) of subsection (c)(3). Applicants for such
additional grants shall comply with all of the provisions of this section, including providing
matching funds, except that funding under this paragraph shall be effective for any fiscal year to
the extent provided in advance in appropriations Acts and shall be in addition to the dollar
program limitations specified in paragraphs (4) and (5). No recipient of funds under this
paragraph shall receive a grant which would exceed its pro rata share of a $15,000,000 program
based upon the populations to be served by the Small Business Development Center as compared
to the total population of the United States. The minimum amount of eligibility for any State
shall be $100,000.
(7)

PRIVACY REQUIREM ENTS.—

(A)
IN GENERAL.—A small business development center,
consortium of small business development centers, or contractor or agent of a small business
development center may not disclose the name, address, or telephone number of any individual
or small business concern receiving assistance under this section without the consent of such
individual or small business concern, unless—
(i)
the Administrator is ordered to make such a disclosure by a
court in any civil or criminal enforcement action initiated by a Federal or State agency; or
(ii)
the Administrator considers such a disclosure to be
necessary for the purpose of conducting a financial audit of a small business development center,
but a disclosure under this clause shall be limited to the information necessary for such audit.
(B)

ADMINISTRATOR USE OF INFORMATION.—This section

shall not—

167

SMALL BUSINESS ACT

(i)

restrict Administrator access to program activity data; or

(ii)

prevent the Administrator from using client information to

conduct client surveys.
(C)

REGULATIONS.—
(i)

IN GENERAL.—The Administrator shall issue regulations

to establish standards—
(I)

for disclosures with respect to financial audits under

subparagraph (A)(ii); and
(II)
for client surveys under subparagraph (B)(ii),
including standards for oversight of such surveys and for dissemination and use of client
information.
(ii)
MAXIMUM PRIVACY PROTECTION.—Regulations
under this subparagraph, [sic] shall, to the extent practicable, provide for the maximum amount
of privacy protection.
(iii)
INSPECTOR GENERAL.—Until the effective date of
regulations under this subparagraph, any client survey and the use of such information shall be
approved by the Inspector General who shall include such approval in his semi-annual report.
(b)
(1)
Financial assistance shall not be made available to any applicant if
approving such assistance would be inconsistent with a Plan for the area involved which has
been adopted by an agency recognized by the State government as authorized to do so and
approved by the Administration in accordance with the standards and requirements established
pursuant to this section.
(2)
An applicant may apply to participate in the program by submitting to the
Administration for approval a Plan naming those authorized in subsection (a) to participate in the
program, the geographic area to be served, the services that it would provide, the method for
delivering services, a budget, and any other information and assurances the Administration may
require to insure that the applicant will carry out the activities eligible for assistance. The
Administration is authorized to approve, conditionally approve or reject a Plan or combination of
Plans submitted. In all cases, the Administration shall review Plans for conformity with the Plan
submitted pursuant to paragraph (1) of this subsection, and with a view toward providing small
business with the most comprehensive and coordinated assistance in the State or part thereof to
be served.
(3)
At the discretion of the Administration, the Administration is authorized to
permit a small business development center to provide advice, information and assistance, as
described in subsection (c), to small businesses located outside the State, but only to the extent

168

SMALL BUSINESS ACT

such businesses are located within close geographical proximity to the small business
development center, as determined by the Administration.
(c)
(1)
Applicants receiving grants under this section shall assist small businesses
in solving problems concerning operations, manufacturing, engineering, technology exchange
and development, personnel administration, marketing, sales, merchandising, finance,
accounting, business strategy development, and other disciplines required for small business
growth and expansion, innovation, increased productivity, and management improvement, and
for decreasing industry economic concentrations.
(2)
A small business development center shall provide services as close as
possible to small businesses by providing extension services and utilizing satellite locations
when necessary. The facilities and staff of each Small Business Development Center shall be
located in such places as to provide maximum accessibility and benefits to the small business
which the center is intended to serve. To the extent possible, it also shall make full use of other
Federal and State government programs that are concerned with aiding small business. A small
business development center shall have—
(A)
a full-time staff, including a full-time director who shall have the
authority to make expenditures under the center's budget and who shall manage the program
activities;
(B)

access to business analysts to counsel, assist, and inform small

business clients;
(C)
access to technology transfer agents to provide state of art
technology to small businesses through coupling with national and regional technology data
sources;
(D)
access to information specialists to assist in providing information
searches and referrals to small business;
(E)
access to part-time professional specialists to conduct research or
to provide counseling assistance whenever the need arises; and
(F)

access to laboratory and adaptive engineering facilities.

(3)
Services provided by a small business development center shall include,
but shall not be limited to -(A)

furnishing one-to-one individual counseling to small businesses,

including—
(i)
working with individuals to increase awareness of basic
credit practices and credit requirements;

169

SMALL BUSINESS ACT

(ii)
working with individuals to develop business Plans,
financial packages, credit applications, and contract proposals;
(iii)
working with the Administration to develop and provide
informational tools for use in working with individuals on pre-business startup Planning, existing
business expansion, and export Planning; and
(iv)
working with individuals referred by the local offices of the
Administration and Administration participating lenders;
(B)
assisting in technology transfer, research and development,
including applied research, and coupling from existing sources to small businesses, including—
(i)
working to increase the access of small businesses to the
capabilities of automated flexible manufacturing systems;
(ii)
working through existing networks and developing new
networks for technology transfer that encourage partnership between the small business and
academic communities to help commercialize university-based research and development and
introduce university-based engineers and scientists to their counterparts in small
technology-based firms; and
(iii)
exploring the viability of developing shared production
facilities, under appropriate circumstances;
(C)
in cooperation with the Department of Commerce and other
relevant Federal agencies, actively assisting small businesses in exporting by identifying and
developing potential export markets, facilitating export transactions, developing linkages
between United States small business firms and prescreened foreign buyers, assisting small
businesses to participate in international trade shows, assisting small businesses in obtaining
export financing, and facilitating the development or reorientation of marketing and production
strategies; where appropriate, the Small Business Development Center and the Administration
may work in cooperation with the State to establish a State international trade center for these
purposes;
(D)
developing a program in conjunction with the Export-Import Bank
and local and regional Administration offices that will enable Small Business Development
Centers to serve as an information network and to assist small business applicants for
Export-Import Bank financing programs, and otherwise identify and help to make available
export financing programs to small businesses;
(E)
working closely with the small business community, small
business consultants, State agencies, universities and other appropriate groups to make
translation services more readily available to small business firms doing business, or attempting
to develop business, in foreign markets;

170

SMALL BUSINESS ACT

(F)
in providing assistance under this subsection, applicants shall
cooperate with the Department of Commerce and other relevant Federal agencies to increase
access to available export market information systems, including the CIMS system;
(G)
assisting small businesses to develop and implement strategic
business Plans to timely and effectively respond to the Planned closure (or reduction) of a
Department of Defense facility within the community, or actual or projected reductions in such
firms' business base due to the actual or projected termination (or reduction) of a Department of
Defense program or a contract in support of such program—
(i)

by developing broad economic assessments of the adverse

impacts of—
(I)
the closure (or reduction) of the Department of
Defense facility on the small business concerns providing goods or services to such facility or to
the military and civilian personnel currently stationed or working at such facility; and
(II)
the termination (or reduction) of a Department of
Defense program (or contracts under such program) on the small business concerns participating
in such program as a prime contractor, subcontractor or supplier at any tier;
(ii)
by developing, in conjunction with appropriate Federal,
State, and local governmental entities and other private sector organizations, the parameters of a
transition adjustment program adaptable to the needs of individual small business concerns;
(iii)
by conducting appropriate programs to inform the affected
small business community regarding the anticipated adverse impacts identified under clause (i)
and the economic adjustment assistance available to such firms; and
(iv)
by assisting small business concerns to develop and
implement an individualized transition business Plan.
(H)
maintaining current information concerning Federal, State, and
local regulations that affect small businesses and counsel small businesses on methods of
compliance. Counseling and technology development shall be provided when necessary to help
small businesses find solutions for complying with environmental, energy, health, safety, and
other Federal, State, and local regulations;
(I)
coordinating and conducting research into technical and general
small business problems for which there are no ready solutions;
(J)
providing and maintaining a comprehensive library that contains
current information and statistical data needed by small businesses;
(K)
maintaining a working relationship and open communications with
the financial and investment communities, legal associations, local and regional private

171

SMALL BUSINESS ACT

consultants, and local and regional small business groups and associations in order to help
address the various needs of the small business community;
(L)
conducting in-depth surveys for local small business groups in
order to develop general information regarding the local economy and general small business
strengths and weaknesses in the locality;
(M) in cooperation with the Department of Commerce, the
Administration and other relevant Federal agencies, actively assisting rural small businesses in
exporting by identifying and developing potential export markets for rural small businesses,
facilitating export transactions for rural small businesses, developing linkages between United
States' rural small businesses and prescreened foreign buyers, assisting rural small businesses to
participate in international trade shows, assisting rural small businesses in obtaining export
financing and developing marketing and production strategies;
(N)

assisting rural small businesses—

(i)
in developing marketing and production strategies that will
enable them to better compete in the domestic market—
(ii)

by providing technical assistance needed by rural small

(iii)

by making available managerial assistance to rural small

businesses;

business concerns; and
(iv)
by providing information and assistance in obtaining
financing for business startups and expansion;
(O)
in conjunction with the United States Travel and Tourism
Administration, assist rural small business in developing the tourism potential of rural
communities by—
(i)
resources of such communities;

identifying the cultural, historic, recreational, and scenic

(ii)
providing assistance to small businesses in developing
tourism marketing and promotion Plans relating to tourism in rural areas; and
(iii)
assisting small business concerns to obtain capital for
starting or expanding businesses primarily serving tourists;
(P)
maintaining lists of local and regional private consultants to whom
small businesses can be referred;

172

SMALL BUSINESS ACT

(Q)
providing information to small business concerns regarding
compliance with regulatory requirements;
(R)
developing informational publications, establishing resource
centers of reference materials, and distributing compliance guides published under section 312(a)
of the Small Business Regulatory Enforcement Fairness Act of 1996;
(S)
providing small business owners with access to a wide variety of
export-related information by establishing on- line computer linkages between small business
development centers and an international trade data information network with ties to the Export
Assistance Center program; and
(T)
providing information and assistance to small business concerns
with respect to establishing drug- free workplace programs on or before October 1, 2006.
(4)
A small business development center shall continue to upgr ade and
modify its services, as needed, in order to meet the changing and evolving needs of the small
business community.
(5)
In addition to the methods prescribed in section 21(c)(2), a small business
development center shall utilize and compensate as one of its resources qualified small business
vendors, including but not limited to, private management consultants, private consulting
engineers and private testing laboratories, to provide services as described in this subsection to
small businesses on behalf of such small business development center.
(6)
In any State (A) in which the Administration has not made a grant
pursuant to paragraph (1) of subsection (a), or (B) in which no application for a grant has been
made by a Small Business Development Center pursuant to paragraph (6) of such subsection
within 60 days after the effective date of any grant under subsection (a)(1) to such center or the
date the Administration notifies the grantee funded under subsection (a)(1) that funds are
available for grant applications pursuant to subsection (a)(6), whichever date occurs last, the
Administration may make grants to a non-profit entity in that State to carry out the activities
specified in paragraph (6) of subsection (a). Any such applicants shall comp ly with the matching
funds requirement of paragraph (4) of subsection (a). Such grants shall be effective for any
fiscal year only to the extent provided in advance in appropriations Acts, and each State shall be
limited to the pro rata share provisions of paragraph (6) of subsection (a).
(7)
In performing the services identified in paragraph (3), the Small Business
Development Centers shall work in close cooperation with the Administration's regional and
local offices, the local small business community, and appropriate State and local agencies.
(8)
The Associate Administrator for Small Business Development Centers, in
consultation with the Small Business Development Centers, shall develop and implement an
information sharing system. Subject to amounts approved in advance in appropriations Acts, the
Administration may make grants or enter cooperative agreements with one or more centers to
carry out the provisions of this paragraph. Said grants or cooperative agreements shall be

173

SMALL BUSINESS ACT

awarded for periods of no more than five years duration. The matching funds provisions of
subsection (a) shall not be applicable to grants or cooperative agreements under this paragraph.
The system shall
(A)
allow Small Business Development Centers participating in the
program to exchange information about their programs; and
(B)

provide information central to technology transfer.

(d)
Where appropriate, the Small Business Development Centers shall work in
conjunction with the relevant State agency and the Department of Commerce to develop a
comprehensive Plan for enhancing the export potential of small businesses located within the
State. This Plan may involve the cofunding and staffing of a State Office of International Trade
within the State Small Business Development Center, using joint State and Federal funding, and
any other appropriate measures directed at improving the export performances of small
businesses within the State.
(e)
Laboratories operated and funded by the Federal Government are authorized and
directed to cooperate with the Administration in developing and establishing programs to support
small business development centers by making facilities and equipment available; providing
experiment station capabilities in adaptive engineering; providing library and technical
information processing capabilities; and providing professional staff for consulting. The
Administration is authorized to reimburse the laboratories for such services.
(f)
The National Science Foundation is authorized and directed to cooperate with the
Administration and with the Small Business Development Centers in developing and
establishing programs to support the centers.
(g)
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION AND
REGIONAL TECHNOLOGY TRANSFER CENTERS.—The National Aeronautics and Space
Administration and regional technology transfer centers supported by the National Aeronautics
and Space Administration are authorized and directed to cooperate with small business
development centers participating in the program.
(h)
ASSOCIATE ADMINISTRATOR FOR SMALL BUSINESS DEVELOPMENT
CENTERS.—
(1)
APPOINTMENT AND COMPENSATION.—The Administrator shall
appoint an Associate Administrator for Small Business Development Centers who shall report to
an official who is not more than one level below the Office of the Administrator and who shall
serve without regard to the provisions of title 5 governing appointments in the competitive
service, and without regard to chapter 51, and subchapter III of chapter 53 of such title relating to
classification and General Schedule pay rates, but at a rate not less than the rate of GS-17 of the
General Schedule.
(2)

DUTIES.—

174

SMALL BUSINESS ACT

(A)
IN GENERAL.—The sole responsibility of the Associate
Administrator for Small Business Development Centers shall be to administer the small business
development center program. Duties of the position shall include recommending the annual
program budget, reviewing the annual budgets submitted by each applicant, establishing
appropriate funding levels therefore, selecting applicants to participate in this program,
implementing the provisions of this section, maintaining a clearinghouse to provide for the
dissemination and exchange of information between small business development centers and
conducting audits of recipients of grants under this section.
(B)
CONSULTATION REQUIREMENTS.—In carrying out the duties
described in this subsection, the Associate Administrator shall confer with and seek the advice of
the Board established by subsection (i) and Administration officia ls in areas served by the small
business development centers; however, the Associate Administrator shall be responsible for the
management and administration of the program and shall not be subject to the approval or
concurrence of such Administration officials.
(i)
(1)
There is established a National Small Business Development Center
Advisory Board (herein referred to as "Board") which shall consist of nine members appointed
from civilian life by the Administrator and who shall be persons of outstanding qualifications
known to be familiar and sympathetic with small business needs and problems. No more than
three members shall be from universities or their affiliates and six shall be from small businesses
or associations representing small businesses. At the time of the appointment of the Board, the
Administrator shall designate one-third of the members and at least one from each category
whose term shall end in two years from the date of appointment, a second third whose terms
shall end in three years from the date of appointment, and the final third whose term shall end in
four years from the date of appointment. Succeeding Boards shall have three-year terms, with
one-third of the Board changing each year.
(2)
The Board shall elect a Chairman and advise, counsel, and confer with the
Associate Administrator for Small Business Development Centers in carrying out the duties
described in this section. The Board shall meet at least semiannually and at the call of the
Chairman of the Board. Each member of the Board shall be entitled to be compensated at the
rate not in excess of their per diem equivalent of the highest rate of pay for individuals
occupying the position under GS-18 of the General Schedule for each day engaged in activities
of the Board and shall be entitled to be reimbursed for expenses as a member of the Board.
(j)

(1)

Each small business development center shall establish an advisory board.

(2)
Each small business development center advisory board shall elect a
chairman and advise, counsel, and confer with the director of the small business development
center on all policy matters pertaining to the operation of the small business development center,
including who may be eligible to receive assistance from, and how local and regional private
consultants may participate with the small business development center.
(k)

PROGRAM EXAMINATION AND ACCREDITATION.—

175

SMALL BUSINESS ACT

(1)
EXAMINATION.—Not later than 180 days after the date of enactment of
this subsection, the Administration shall develop and implement a biennial programmatic and
financial examination of each small business development center established pursuant to this
section.
(2)
ACCREDITATION.—The Administration may provide financial support,
by contract or otherwise, to the association authorized by subsection (a)(3)(A) for the purpose of
developing a small business development center accreditation program.
(3)

EXTENSION OR RENEWAL OF COOPERATIVE AGREEMENTS.—

(A)
IN GENERAL.—In extending or renewing a cooperative
agreement of a small business development center, the Administration shall consider the results
of the examination and accreditation program conducted pursuant to paragraphs (1) and (2).
(B)
ACCREDITATION REQUIREMENT.—After September 30,
2000, the Administration may not renew or extend any cooperative agreement with a small
business development center unless the center has been approved under the accreditation
program conducted pursuant to this subsection, except that the Associate Administrator for Small
Business Development Centers may waive such accreditation requirement, in the discretion of
the Associate Administrator, upon a showing that the center is making a good faith effort to
obtain certification.
(l)
CONTRACT AUTHORITY.—The authority to enter into contracts shall be in
effect for each fiscal year only to the extent and in the amounts as are provided in advance in
appropriations Acts. After the administration [sic] has entered a contract, either as a grant or a
cooperative agreement, with any applicant under this section, it shall not suspend, terminate, or
fail to renew or extend any such contract unless the Administration provides the applicant with
written notification setting forth the reasons therefore and affording the applicant an opportunity
for a hearing, appeal, or other administrative proceeding under the provisions of chapter 5 of title
5, United States Code. If any contract or cooperative agreement under this section with an entity
that is covered by this section is not renewed or extended, any award of a successor contract or
cooperative agreement under this section to another entity shall be made on a competitive basis.
(m)
PROHIBITION ON CERTAIN FEES.—A small business development center
shall not impose or otherwise collect a fee or other compensation in connection with the
provision of counseling services under this section.
§ 21A. [Repealed].
§ 22. (a)
There is established within the Administration an Office of International Trade
which shall implement the programs pursuant to this section.
(b)
The Office, working in close cooperation with the Department of Commerce and
other relevant Federal agencies, Small Business Development Centers engaged in export

176

SMALL BUSINESS ACT

promotion efforts, regional and local Administration offices, the small business community, and
relevant State and local export promotion programs, shall—
(1)
assist in developing a distribution network for existing trade promotion,
trade finance, trade adjustment, trade remedy assistance and trade data collection programs
through use of the Administration's regional and local offices and the Small Business
Development Center network;
(2)
assist in the aggressive marketing of these programs and the dissemination
of marketing information, including computerized marketing data, to the small business
community; and
(3)
give preference in hiring or approving the transfer of any employee into
the Office or to a position described in paragraph (8) below to otherwise qualified applicants
who are fluent in a language in addition to English. Such employees shall accompany foreign
trade missions if designated by the director of the Office and shall be available as needed to
translate documents, interpret conversations and facilitate multilingual transactions including
providing referral lists for translation services if required.
(c)
The Office shall promote sales opportunities for small business goods and
services abroad. To accomplish this objective the office shall—
(1)
in cooperation with the Department of Commerce, other relevant agencies,
regional and local Administration offices, the Small Business Development Center network, and
State programs, develop a mechanism for (A) identifying sub-sectors of the small business
community with strong export potential; (B) identifying areas of demand in foreign markets; (C)
prescreening foreign buyers for commercial and credit purposes; and (D) assisting in increasing
international marketing by disseminating relevant information regarding market leads, linking
potential sellers and buyers, and catalyzing the formation of joint ventures, where appropriate;
(2)
in cooperation with the Department of Commerce, actively assist small
businesses in the formation and utilization of export trading companies, export management
companies and research and development pools authorized under section 9 of this Act;
(3)
work in conjunction with other Federal agencies, regional and local offices
of the Administration, the Small Business Development Center network, and the private sector to
identify and publicize existing translation services, including those available through colleges
and universities participating in the Small Business Development Center Program;
(4)
work closely with the Department of Commerce and other relevant
Federal agencies to—
(A)
collect, analyze and periodically update relevant data regarding the
small business share of United States exports and the nature of State exports (including the
production of Gross State Produce figures) and disseminate that data to the public and to
Congress;

177

SMALL BUSINESS ACT

(B)
make recommendations to the Secretary of Commerce and to
Congress regarding revision of the SIC codes to encompass industries currently overlooked and
to create SIC codes for export trading companies and export management companies;
(C)
improve the utility and accessibility of existing export promotion
programs for small businesses; and
(D)

increase the accessibility of the Export Trading Company contact

facilitation service;
(5)
make available to the small business community information regarding
conferences on exporting and international trade sponsored by the public and private sector;
(6)
information by—

provide small businesses with access to current and complete export

(A)
making available, at the Administration's regional offices through
cooperation with the Department of Commerce, export information, including, but not limited to,
the worldwide information and trade system and world trade data reports;
(B)

maintaining a current list of financial institutions that finance

export operations;
(C)
maintaining a current directory of all Federal, regional, State and
private sector programs that provide export information and assistance to small businesses; and
(D)
preparing and publishing such reports as it determines to be
necessary concerning market conditions, sources of financing, export promotion programs, and
other information pertaining to the needs of small business exporting firms so as to insure that
the maximum information is made available to small businesses in a readily usable form;
(7)
encourage through cooperation with the Department of Commerce, greater
small business participation in trade fairs, shows, missions, and other domestic and overseas
export development activities of the Department of Commerce; and
(8)
facilitate decentralized delivery of export information and assistance to
small businesses by assigning full- time export development specialists to each Administration
regional office and assigning primary responsibility for export development to one person in
each district office. Such specialists shall -(A)
assist small businesses in obtaining export information and
assistance from other Federal departments and agencies;
(B)
maintain a current directory of all programs which provide export
information and assistance to small businesses within the region;

178

SMALL BUSINESS ACT

(C)

encourage financial institutions to develop and expand programs

for export financing;
(D)
provide advice to Administration personnel involved in granting
loans, loan guarantees, and extensions and revolving lines of credit, and providing other forms of
assistance to small businesses engaged in exports; and
(E)
within one hundred and eighty days of their appointment,
participate in training programs designed by the Administrator, in conjunction with the
Department of Commerce and other Federal departments and agencies, to study export programs
and to examine small businesses' needs for export information and assistance.
(d)
The Office shall work in cooperation with the Export-Import Bank of the United
States, the Department of Commerce, other relevant Federal agencies, and the States to develop a
program through which export specialists in the regional offices of the Administration, regional
and local loan officers, and Small Business Development Center personnel can facilitate the
access of small businesses to relevant export financing programs of the Export-Import Bank of
the United States and to export and pre-export financing programs available from the
Administration and the private sector. To accomplish this goal, the Office shall work in
cooperation with the Export-Import Bank and the small business community, including small
business trade associations, to—
(1)
aggressively market existing Administration export financing and
pre-export financing programs;
(2)
identify financing available under various Export-Import Bank programs,
and aggressively market those programs to small businesses;
(3)
assist in the development of financial intermediaries and facilitate the
access of those intermediaries to existing financing programs;
(4)
promote greater participation by private financial institutions, particularly
those institutions already participating in loan programs under this Act, in export finance; and
(5)
provide for the participation of appropriate Administration personnel in
training programs conducted by the Export-Import Bank.
(e)

The Office shall—

(1)
work in cooperation with other Federal agencies and the private sector to
counsel small businesses with respect to initiating and participating in any proceedings relating
to the administration of the United States trade laws; and

179

SMALL BUSINESS ACT

(2)
work with the Department of Commerce, the Office of the United States
Trade Representative, and the International Trade Commission to increase access to trade
remedy proceedings for small businesses.
(f)
The Office shall report to the Committees on Small Business of the House of
Representatives and the Senate on an annual basis as to its progress in implementing the
requirements under this section.
(g)
The Office, in cooperation, where appropriate, with the Division of Economic
Research of the Office of Advocacy, and with other Federal agencies, shall undertake studies
regarding the following issues and shall report to the Committees on Small Business of the
House of Representatives and the Senate, and to other relevant Committees of the House and
Senate within 6 months after the date of enactment of the Small Business International Trade and
Competitiveness Act with specific recommendations on—
(1)
the viability and cost of establishing an annual, competitive small business
export incentive program similar to the Small Business Innovation Research program and
alternative methods of structuring suc h a program;
(2)
methods of streamlining trade remedy proceedings to increase access for,
and reduce expenses incurred by, smaller firms;
(3)
methods of improving the current small business foreign sales corporation
tax incentives and providing small businesses with greater benefits from this initiative;
(4)
methods of identifying potential export markets for United States small
businesses; maintaining and disseminating current foreign market data; and devising a
comprehensive export marketing strategy for United States small business goods and services,
and shall include data on the volume and dollar amount of goods and services, identified by type,
imported by United States trading partners over the past 10 years; and
(5)
the results of a surve y of major United States trading partners to identify
the domestic policies, programs and incentives, and the private sector initiatives, which exist to
encourage the formation and growth of small business.
§ 23. SUPERVISORY AND ENFORCEMENT AUTHORITY FOR SMALL BUSINESS
LENDING COMPANIES.
(a)

IN GENERAL.—The Administrator is authorized—

(1)
to supervise the safety and soundness of small business lending companies
and non-Federally regulated lenders;
(2)
with respect to small business lending companies to set capital standards
to regulate, to examine, and to enforce laws governing such companies, in accordance with the
purposes of this Act; and

180

SMALL BUSINESS ACT

(3)
with respect to non-Federally regulated lenders to regulate, to examine,
and to enforce laws governing the lending activities of such lenders under section 7(a) in
accordance with the purposes of this Act.
(b)

CAPITAL DIRECTIVE.—

(1)
IN GENERAL.—If the Administrator determines that a small business
lending company is being operated in an imprudent manner, the Administrator may, in addition
to any other action authorized by law, issue a directive to such company to increase capital to
such level as the Administrator determines will result in the safe and sound operation of such
company.
(2)
DELEGATION.—The Administrator may not delegate the authority
granted under paragraph (1) except to an Associate Deputy Administrator.
(3)
REGULATIONS.—The Administrator shall issue regulations outlining
the conditions under which the Administrator may determine the level of capital pursuant to
paragraph (1).
(c)
CIVIL ACTION.—If a small business lending company violates this Act, the
Administrator may institute a civil action in an appropriate district court to terminate the rights,
privileges, and franchises of the company under this Act.
(d)

REVOCATION OR SUSPENSION OF LOAN AUTHORITY.—

(1)
The Administrator may revoke or suspend the authority of a small
business lending company or a non-Federally regulated lender to make, service or liquidate
business loans authorized by section 7(a) of this Act—
(A)
required under this Act;

for false statements knowingly made in any written submission

(B)
required under this Act;

for omission of a material fact from any written submission

(C)

for willful or repeated violation of this Act;

(D)
for willful or repeated violation of any condition imposed by the
Administrator with respect to any application, request, or agreement under this Act; or
(E)

for violation of any cease and desist order of the Administrator

under this section.
(2)
The Administrator may revoke or suspend authority under paragraph (1)
only after a hearing under subsection (f). The Administrator may delegate power to revoke or

181

SMALL BUSINESS ACT

suspend authority under paragraph (1) only to the Deput y Administrator and only if the
Administrator is unavailable to take such action.
(A)
The Administrator, after finding extraordinary circumstances and
in order to protect the financial or legal position of the United States, may issue a suspension
order without conducting a hearing pursuant to subsection (f). If the Administrator issues a
suspension under the preceding sentence, the Administrator shall within two business days
follow the procedures set forth in subsection (f).
(B)
Any suspension under paragraph (1) shall remain in effect until the
Administrator makes a decision pursuant to subparagraph (4) to permanently revoke the
authority of the small business lending company or non-Federally regulated lender, suspend the
authority for a time certain, or terminate the suspension.
(3)
The small business lending company or non-Federally regulated lender
must notify borrowers of a revocation and that a new entity has been appointed to service their
loans. The Administrator or an employee of the Administration designated by the Administrator
may provide such notice to the borrower.
(4)
Any revocation or suspension under paragraph (1) shall be made by the
Administrator except that the Administrator shall delegate to an administrative law judge as that
term is used in section 3105 of title 5, United States Code, the authority to conduct any hearing
required under subsection (f). The Administrator shall base the decision to revoke on the record
of the hearing.
(e)

CEASE AND DESIST ORDER.—

(1)
Where a small business lending company, a non-Federally regulated
lender, or other person violates this Act or is engaging or is about to engage in any acts or
practices which constitute or will constitute a violation of this Act, the Administrator may order,
after the opportunity for hearing pursuant to subsection (f), the company, lender, or other person
to cease and desist from such action or failure to act. The Administrator may delegate the
authority under the preceding sentence only to the Deputy Administrator and only if the
Administrator is unavailable to take such action.
(2)
The Administrator, after finding extraordinary circumstances and in order
to protect the financial or legal position of the United States, may issue a cease and desist order
without conducting a hearing pursuant to subsection (f). If the Administrator issues a cease and
desist order under the preceding sentence, the Administrator shall within two business days
follow the procedures set forth in subsection (f).
(3)
The Administrator may further order such small business lending
company or non-Federally regulated lender or other person to take such action or to refrain from
such action as the Administrator deems necessary to insure compliance with this Act.

182

SMALL BUSINESS ACT

(4)
A cease and desist order under this subsection may also provide for the
suspension of authority to lend in subsection (d).
(f)
PROCEDURE FOR REVOCATION OR SUSPENSION OF LOAN
AUTHORITY AND FOR CEASE AND DESIST ORDER.—
(1)
Before revoking or suspending authority under subsection (d) or issuing a
cease and desist order under subsection (e), the Administrator shall serve an order to show cause
upon the small business lending company, non-Federally regulated lender, or other person why
an order revoking or suspending the authority or a cease and desist order should not be issued.
The order to show cause shall contain a statement of the matters of fact and law asserted by the
Administrator and the legal authority and jurisdiction under which a hearing is to be held, and
shall set forth that a hearing will be held before an administrative law judge at a time and place
stated in the order. Such hearing shall be conducted pursuant to the provisions of sections 554,
556, and 557 of title 5, United States Code. If after hearing, or a waiver thereof, the
Administrator determines that an order revoking or suspending the authority or a cease and desist
order should be issued, the Administrator shall promptly issue such order, which shall include a
statement of the findings of the Administrator and the grounds and reasons therefore and specify
the effective date of the order, and shall cause the order to be served on the small business
lending company, non-Federally regulated lender, or other person involved.
(2)
Witnesses summoned before the Administrator shall be paid by the party
at whose instance they were called the same fees and mileage that are paid witnesses in the
courts of the United States.
(3)
A cease and desist order, suspension or revocation issued by the
Administrator, after the hearing under this subsection is final agency action for purposes of
chapter 7 of title 5, United States Code. An adversely aggrieved party shall have 20 days from
the date of issuance of the cease and desist order, suspension or revocation, to seek judicial
review in an appropriate district court.
(g)

REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIAL.—

(1)
DEFINITION.—In this section, the term “management official” means,
with respect to a small business lending company or a non-Federally regulated lender, an officer,
director, general partner, manager, employee, agent, or other participant in the management of
the affairs of the company’s or lender’s activities under section 7(a) of this Act.
(2)

REMOVAL OF MANAGEMENT OFFICIAL.—

(A)
NOTICE.—The Administrator may serve upon any management
official a written notice of its intention to remove that management official if, in the opinion of
the Administrator, the management official—
(i)

willfully and knowingly commits a substantial violation

of—

183

SMALL BUSINESS ACT

(I)

this Act;

(II)

any regulation issued under this Act;

(III)

a final cease-and-desist order under this Act; or

(IV) any agreement by the management official, the
small business lending company or non-Federally regulated lender under this Act; or
(ii)
willfully and knowingly commits a substantial breach of a
fiduciary duty of that person as a management official and the violation or breach of fiduciary
duty is one involving personal dishonesty on the part of such management official.
(B)
CONTENTS OF NOTICE.—A notice under subparagraph (A)
shall contain a statement of the facts constituting grounds therefore and shall fix a time and place
at which a hearing, conducted pursuant to sections 554, 556, and 557 of title 5, United States
Code, will be held thereon.
(C)

HEARING.—

(i)
TIMING.—A hearing under subparagraph (B) shall be held
not earlier than 30 days and later than 60 days after the date of service of notice of the hearing,
unless an earlier or a later date is set by the Administrator at the request of—
(I)

the management official, and for good cause shown;

(II)

the Attorney General.

or

(ii)
CONSENT.—Unless the management official appears at a
hearing under this paragraph in person or by a duly authorized representative, the management
official shall be deemed to have consented to the issuance of an order of removal under
subparagraph (A).
(D)

ORDER OF REMOVAL.—

(i)
IN GENERAL.—In the event of consent under
subparagraph (C)(ii), or if upon the record made at a hearing under this subsection, the
Administrator finds that any of the grounds specified in the notice of removal has been
established, the Administrator may issue such orders of removal from office as the Administrator
deems appropriate.
(ii)

EFFECTIVENESS.—An order under clause (i) shall—

184

SMALL BUSINESS ACT

(I)
take effect 30 days after the date of service upon the
subject small business lending company or non-Federally regulated lender and the management
official concerned (except in the case of an order issued upon consent as described in
subparagraph (C)(ii), which shall become effective at the time specified in such order); and
(II)
remain effective and enforceable, except to such
extent as it is stayed, modified, terminated, or set aside by action of the Administrator or a
reviewing court in accordance with this section.
(3)

AUTHORITY TO SUSPEND OR PROHIBIT PARTICIPATION.—

(A)
IN GENERAL.—In order to protect a small business lending
company, a non-Federally regulated lender or the interests of the Administration or the United
States, the Administrator may suspend from office or prohibit from further participation in any
manner in the management or conduct of the affairs of a small business lending company or a
non-Federally regulated lender a management official by written notice to such effect served
upon the management official. Such suspension or prohibition may prohibit the management
official from making, servicing, reviewing, approving, or liquidating any loan under section 7(a)
of this Act.
(B)

EFFECTIVENESS.—A suspension or prohibition under

subparagraph (A)—
(i)

shall take effect upon service of notice under paragraph (2);

and
(ii)
unless stayed by a court in proceedings authorized by
subparagraph (C), shall remain in effect—
(I)
pending the completion of the administrative
proceedings pursuant to a notice of intention to remove served under paragraph (2); and
(II)
until such time as the Administrator dismisses the
charges specified in the notice, or, if an order of removal or prohibition is issued against the
management official, until the effective date of any such order.
(C)
JUDICIAL REVIEW OF SUSPENSION PRIOR TO
HEARING.—Not later than 10 days after a management official is suspended or prohibited from
participation under subparagraph (A), the management official may apply to an appropriate
district court for a stay of the suspension or prohibition pending the completion of the
administrative proceedings pursuant to a notice of intent to remove served upon the management
official under paragraph (2).
(4)

AUTHORITY TO SUSPEND ON CRIMINAL CHARGES.—

185

SMALL BUSINESS ACT

(A)
IN GENERAL.—If a management official is charged in any
information, indictment, or complaint authorized by a United States attorney, with a felony
involving dishonesty or breach of trust, the Administrator may, by written notice served upon the
management official, suspend the management official from office or prohibit the management
official from further participation in any manner in the management or conduct of the affairs of
the small business lending company or non-Federally regulated lender.
(B)
EFFECTIVENESS.—A suspension or prohibition under
subparagraph (A) shall remain in effect until the information, indictment, or complaint is finally
disposed of, or until terminated by the Administrator or upon an order of a district court.
(C)
AUTHORITY UPON CONVICTION.—If a judgment of
conviction with respect to an offense described in subparagraph (A) is entered against a
management official, then at such time as the judgment is not subject to further judicial review
(and for purposes of this subparagraph shall not include any petition for a writ of habeas corpus),
the Administrator may issue and serve upon the management official an order removing the
management official, effective upon service of a copy of the order upon the small business
lending company or non-Federally regulated lender.
(D)
AUTHORITY UPON DISMISSAL OR OTHER
DISPOSITION.—A finding of not guilty or other disposition of charges described in
subparagraph (A) shall not preclude the Administrator from instituting proceedings under
subsection (e) or (f).
(5)
NOTIFICATION TO SMALL BUSINESS LENDING COMPANY OR A
NON-FEDERALLY REGULATED LENDER.—Copies of each notice required to be served on
a management official under this section shall also be served upon the small business lending
company or non-Federally regulated lender involved.
(6)

FINAL AGENCY ACTION AND JUDICIAL REVIEW.—

(A)
ISSUANCE OF ORDERS.—After a hearing under this subsection,
and not later than 30 days after the Administrator notifies the parties that the case has been
submitted for final decision, the Administrator shall render a decision in the matter (which shall
include findings of fact upon which its decision is predicated), and shall issue and cause to be
served upon each party to the proceeding an order or orders consistent with this section. The
decision of the Administrator shall constitute final agency action for purposes of chapter 7 of
title 5, United States Code.
(B)
JUDICIAL REVIEW.—An adversely aggrieved party shall have
20 days from the date of issuance of the order to seek judicial review in an appropriate district
court.
(h)

APPOINTMENT OF RECEIVER.—

186

SMALL BUSINESS ACT

(1)
In any proceeding under subsection (f)(4) or subsection (g)(6)(C) [sic], the
court may take exclusive jurisdiction of a small business lending company or a non-Federally
regulated lender and appoint a receiver to hold and administer the assets of the company or
lender.
(2)
Upon request of the Administrator, the court may appoint the
Administrator as a receiver under paragraph (1).
(i)

POSSESSION OF ASSETS.—

(1)
If a small business lending company or a non-Federally regulated lender is
not in compliance with capital requirements or is insolvent, the Administrator may take
possession of the portfolio of loans guaranteed by the Administrator and sell such loans to a third
party by means of a receiver appointed under subsection (h).
(2)
If a small business lending company or a non-Federally regulated lender is
not in compliance with capital requirements or is insolvent or otherwise operating in an unsafe
and unsound condition, the Administrator may take possession of servicing activities of loans
that are guaranteed by the Administrator and sell such servicing rights to a third party by means
of a receiver appointed under subsection (h).
(j)

PENALTIES AND FORFEITURES.—

(1)
Except as provided in paragraph (2), a small business lending company or
a non-Federally regulated lender which violates any regulation or written directive issued by the
Administrator regarding the filing of any regular or special report shall pay to the United States a
civil penalty of not more than $5,000 for each day of the continuance of the failure to file such
report, unless it is shown that such failure is due to reasonable cause and not due to willful
neglect. The civil penalties under this subsection may be enforced in a civil action brought by
the Administrator. The penalties under this subsection shall not apply to any affiliate of a small
business lending company that procures at least 10 percent of its annual purchasing requirements
from small manufacturers.
(2)
The Administrator may by rules and regulations that shall be codified in
the Code of Federal Regulations, after an opportunity for notice and comment, or upon
application of an interested party, at any time previous to such failure, by order, after notice and
opportunity for hearing which shall be conducted pursuant to sections 554, 556, and 557 of title
5, United States Code, exempt in whole or in part, any small business lending company or nonFederally regulated lender from paragraph (1), upon such terms and conditions and for such
period of time as it deems necessary and appropriate, if the Administrator finds that such action
is not inconsistent with the public interest or the protection of the Administration. The
Administrator may for the purposes of this section make any alternative requirements appropriate
to the situation.
§ 24. (a)
The Administrator is authorized to make grants to or to enter into contracts with
any State for the purpose of contracting with small businesses to plant trees on land owned or

187

SMALL BUSINESS ACT

controlled by such State or local government. The Administrator shall require as a condition of
any grant (or amendment or modification thereof) under this section that the applicant also
contribute to the project a sum equal to at least 25 per centum of a particular project cost from
sources other than the Federal Government. Such non-Federal money may include inkind
contributions, including the cost or value of providing care and maintenance for a period of three
years after the planting of the trees, but shall not include any value attributable to the land on
which the trees are to be planted, nor may any part of any grant be used to pay for land or land
charges: Provided, That not less than one-half of the amounts appropriated under this section
shall be allocated to each State, the District of Columbia, and the Commonwealth of Puerto Rico
on the basis of the population in each area as compared to the total population in all areas as
provided by the Census Bureau of the Department of Commerce in the annual population
estimate or the decennial census, whichever is most current. The Administrator may give a
priority in awarding the remaining one-half of appropriated amounts to applicants who agree to
contribute more than the requisite 25 per centum, and shall give priority to a proposal to restore
an area determined to be a major disaster by the President on a date not more than three years
prior to the fiscal year for which the application is made.
(b)
In order to accomplish the objectives of this section, the Administrator, in
consultation with appropriate Federal agencies, shall be responsible for formulating a national
small business tree planting program. Based on this program, a State may submit a detailed
proposal for tree planting by contract.
(c)
To encourage and develop the capacity of small business concerns, to utilize this
important segment of our economy, and to permit rapid increases in employment opportunities in
local communities, grantees are directed to utilize small business contractors or concerns in
connection with the program established by this section, and shall, to the extent practicable,
divide the project to allow more than one small business concern to perform the work under the
project.
(d)
For purposes of this section, agencies of the Federal Government are hereby
authorized to cooperate with all grantees and with State foresters or other appropriate officials by
providing without charge, in furtherance of this program, technical services with respect to the
planting and growing of such trees.
(e)
There are authorized to be appropriated to carry out the objectives of this section,
$15,000,000 for fiscal year 1991 and $30,000,000 for each of the fiscal years 1992 through 1994,
and all of such sums may remain available until expended.
(f)
Notwithstanding any other law, rule, or regulation, the administration shall
publish in the Federal Register proposed rules and regulations implementing this section within
sixty days after the date of enactment of this section and shall publish final rules and regulations
within one hundred and twenty days of the date of enactment of this section.
(g)

As used in this section:

188

SMALL BUSINESS ACT

(1)
the term "local government" includes political subdivisions of a State such
as counties, parishes, cities, towns and municipalities;
(2)
the term "planting" includes watering, application of fertilizer and
herbicides, pruning and shaping, and other subsequent care and maintenance for a period of three
years after the trees are planted; and
(3)

the term "State" includes any agency thereof.

(h)
The Administrator shall submit annually to the President and the Congress a
report on activities within the scope of this section.
§ 25. (a)
There is hereby established a Central European Small Business Enterprise
Development Commission (hereinafter in this section referred to as the "Commission"). The
Commission shall be comprised of a representative of each of the following: the Small Business
Administration, the Association of American Universities, and the Association of Small Business
Development Centers.
(b)
The Commission shall develop in Czechoslovakia, Poland and Hungary
(hereinafter referred to as "designated Central European countries") a self-sustaining system to
provide management and technical assistance to small business owners.
(1)
Not later than 90 days after the effective date of this section, the
Commission, in consultation with the Agency for International Development, shall enter a
contract with one or more entities to—
(A)
determine the needs of small businesses in the designated Central
European countries for management and technical assistance;
(B)
evaluate appropriate Small Business Development
Center-programs [sic] which might be replicated in order to meet the needs of each of such
countries; and
(C)
identify and assess the capability of educational institutions in each
such country to develop a Small Business Development Center type program.
(2)
Not later than 18 months after the effective date of this section, the
Commission shall review the recommendations submitted to it and shall formulate and contract
for the establishment of a three-year management and technical assistance demonstration
program.
(c)
In order to be eligible to participate, the educational institution in each designated
Central European country shall—
(1)

obtain the prior approval of the government to conduct the program;

189

SMALL BUSINESS ACT

(2)
agree to provide partial financial support for the program, either directly or
indirectly, during the second and third years of the demonstration program; and
(3)
under the program.

agree to obtain private sector involvement in the delivery of assistance

(d)
The Commission shall meet and organize not later than 30 days after the date of
enactment of this section.
(e)
Members of the Commission shall serve without pay, except they shall be entitled
to reimbursement for travel, subsistence, and other necessary expenses incurred by them in
carrying out their functions in the same manner as persons employed intermittently in the Federal
Government are allowed expenses under section 5703 of title 5, United States Code.
(f)
Two Commissioners shall constitute a quorum for the transaction of business.
Meetings shall be at the call of the Chairperson who shall be elected by the Members of the
Commission.
(g)
The Commission shall not have any authority to appoint staff, but upon request of
the Chairperson, the head of any Federal department or agency may detail, on a reimbursable
basis, any of the personnel of such department or agency to the Commission to assist in carrying
out the Commission's functions under this section without regard to section 3341 of title 5 of the
United States Code. The Administrator of the General Services Administration shall provide, on
a reimbursable basis, such administrative support services as the Commission may request.
(h)
The Commission shall report to Congress not later than December 1, 1991, and
annually thereafter, on the progress in carrying out the provisions of this section.
(i)
There are hereby authorized to be appropriated to the Small Business
Administration the sum of $3,000,000 for fiscal year 1991, $5,000,000 for fiscal year 1992,
$2,000,000 for each of fiscal years 1993 and 1994, and $1,000,000 for fiscal year 1995 to carry
out the provisions of this section. Such sums shall be disbursed by the Small Business
Administration as requested by the Commission and may remain available until expended. Any
authority to enter contracts or other spending authority provided for in this section is subject to
amounts provided for in advance in appropriations Acts.
§ 26. (a)
There is hereby established in the Small Business Administration an Office of
Rural Affairs (hereafter in this section referred to as the "Office").
(b)
The Office shall be headed by a director who shall be appointed by the
Administrator not later than 90 days after the date of the enactment of this section.
(c)

The Office shall—

(1)
strive to achieve an equitable distribution of the financial assistance
available from the Administration for small business concerns located in rural areas;

190

SMALL BUSINESS ACT

(2)
to the extent practicable, compile annual statistics on rural areas, including
statistics concerning the population, poverty, job creation and retention, unemployment, business
failures, and business startups;
(3)
provide information to industries, organizations, and State and local
governments concerning the assistance available to rural small business concerns through the
Administration and through other Federal departments and agencies;
(4)
provide information to industries, organizations, educational institutions,
and State and local governments concerning programs administered by private organizations,
educational institutions, and Federal, State, and local governments which improve the economic
opportunities of rural citizens; and
(5)
work with the United States Tourism and Travel Administration to assist
small businesses in rural areas with tourism promotion and development.
§ 27.

PAUL D. COVERDELL DRUG-FREE WORKPLACE PROGRAM.
(a)

DEFINITIONS.—In this section:

(1)
DRUG-FREE WORKPLACE PROGRAM.—The term “drug- free
workplace program” means a program that includes—
(A)
a written policy, including a clear statement of expectations for
workplace behavior, prohibitions against reporting to work or working under the influence of
illegal drugs or alcohol, prohibitions against the use or possession of illegal drugs in the
workplace, and the consequences of violating those expectations and prohibitions;
(B)
drug and alcohol abuse prevention training for a total of not less
than 2 hours for each employee, and additional voluntary drug and alcohol abuse prevention
training for employees who are parents;
(C)
employee illegal drug testing, with analysis conducted by a drug
testing laboratory certified by the Substance Abuse and Mental Health Services Administration,
or approved by the College of American Pathologists for forensic drug testing, and a review of
each positive test result by a medical review officer;
(D)
employee access to an employee assistance program, including
confidential assessment, referral, and short-term problem resolution; and
(E)
(2)
an organiza tion—

continuing alcohol and drug abuse prevention education.

ELIGIBLE INTERMEDIARY.—The term “eligible intermediary” means

191

SMALL BUSINESS ACT

(A)
free workplace programs;

that has not less than 2 years of experience in carrying out drug-

(B)

that has a drug-free workplace policy in effect;

(C)

that is located in a State, the District of Columbia, or a territory of

(D)

(i)

the United States; and
the purpose of which is—

(I)
to develop comprehensive drug- free workplace
programs or to supply drug- free workplace services; or
(II)

to provide other forms of assistance and services to

small business concerns; or
(ii)
that is eligible to receive a grant under chapter 2 of the
National Narcotics Leadership Act of 1988 (21 U.S.C. 1521 et seq.).
(3)

EMPLOYEE.—The term “employee” includes any—
(A)

applicant for employment;

(B)

employee;

(C)

supervisor;

(D)

manager;

(E)

officer of a small business concern who is active in management of

(F)

owner of a small business concern who is active in management of

the concern; and

the concern.
(4)

MEDICAL REVIEW OFFICER.—The term “medical review officer”—
(A)

means a licensed physician with knowledge of substance abuse

(B)

does not include any—

disorders; and

(i)

employee of the small business concern; or

(ii)
employee or agent of, or any person having a financial
interest in, the laboratory for which the illegal drug test results are being reviewed.

192

SMALL BUSINESS ACT

(b)

ESTABLISHMENT.—

(1)
IN GENERAL.—There is established a drug- free workplace
demonstration program, under which the Administrator may make grants to, or enter into
cooperative agreement s or contracts with, eligible intermediaries for the purpose of providing
financial and technical assistance to small business concerns seeking to establish a drug- free
workplace program.
(2)
ADDITIONAL GRANTS FOR TECHNICAL ASSISTANCE.—In
addition to grants under paragraph (1), the Administrator may make grants to, or enter into
cooperative agreements or contracts with, any grantee for the purpose of providing, in
cooperation with one or more small business development centers, technical assistance to small
business concerns seeking to establish a drug- free workplace program.
(3)
2-YEAR GRANTS.—Each grant made under this subsection shall be for a
period of 2 years, subject to an annual performance review by the Administrator.
(c)
PROMOTION OF EFFECTIVE PRACTICES OF ELIGIBLE
INTERMEDIARIES.—
(1)
TECHNICAL ASSISTANCE AND INFORMATION.—The
Administrator, after consultation with the Director of the Center for Substance Abuse and
Prevention, shall provide technical assistance and information to each eligible intermediary
under subsection (b) regarding the most effective practices in establishing and carrying out drugfree workplace programs.
(2)

EVALUATION OF PROGRAM.—

(A)
DATA COLLECTION AND ANALYSIS.—Each eligible
intermediary receiving a grant under this section shall establish a system to collect and analyze
information regarding the effectiveness of drug-free workplace programs established with
assistance provided under this section through the intermediary, including information regarding
any increase or decrease among employees in drug use, awareness of the adverse consequences
of drug use, and absenteeism, injury, and disciplinary problems related to drug use. Such system
shall conform to such requirements as the Administrator, after consultation with the Director of
the Center for Substance Abuse and Prevention, may prescribe. Not more than 5 percent of the
amount of each grant made under subsection (b) shall be used by the eligible intermediary to
carry out this paragraph.
(B)
METHOD OF EVALUATION.—The Administrator, after
consultation with the Director of the Center for Substance Abuse and Prevention, shall provide
technical assistance and guidance to each eligible intermediary receiving a grant under
subsection (b) regarding the collection and analysis of information to evaluate the effectiveness
of drug-free workplace programs established with assistance provided under this section,
including the information referred to in paragraph (1). Such assistance shall include the

193

SMALL BUSINESS ACT

identification of additional information suitable for measuring the benefits of drug- free
workplace programs to the small business concern and to the concern’s employees and the
identification of methods suitable for analyzing such information.
(d)
EVALUATION AND COORDINATION. Not later than 18 months after the date
of enactment of the Drug-Free Workplace Act of 1998, the Administrator, in coordination with
the Secretary of Labor, the Secretary of Health and Human Services, and the Director of
National Drug Control Policy, shall—
(1)
evaluate the drug- free workplace programs established with assistance
made available under this section; and
(2)

submit to Congress a report describing the results of the evaluation under

paragraph (1).
(e)

CONTRACT AUTHORITY.—In carrying out this section, the Administrator

may—
(1)
contract with public and private entities to provide assistance related to
carrying out the program under this section; and
(2)

compensate those entities for provision of that assistance.

(f)
CONSTRUCTION.—Nothing in this section may be construed to require an
employer who attends a program offered by an intermediary to contract for any service offered
by the intermediary.
(g)

AUTHORIZATION.—

(1)
IN GENERAL.—There is authorized to be appropriated to carry out this
section, (other than subsection (b)(2)), $5,000,000 for each of fiscal years 2005 and 2006.
Amounts made available under this paragraph shall remain available until expended.
(2)
SMALL BUSINESS DEVELOPMENT CENTERS.—Of the total amount
made available under paragraph (1) for each of fiscal years 2005 and 2006, not more than the
greater of 10 percent or $500,000 may be used to carry out section 21(c)(3)(T).
(3)
ADDITIONAL AUTHORIZATION FOR TECHNICAL ASSISTANCE
GRANTS.—There are authorized to be appropriated to carry out subsection (b)(2), $1,500,000
for each of fiscal years 2005 and 2006. Amounts made available under this paragraph shall
remain available until expended.
(4)
LIMITATION ON ADMINISTRATIVE COSTS.—Not more than 5
percent of the total amount made available under this subsection for any fiscal year shall be used
for administrative costs (determined without regard to the administrative costs of eligible
intermediaries).

194

SMALL BUSINESS ACT

§ 28. PILOT TECHNOLOGY ACCESS PROGRAM.
(a)
The Administration, in consultation with the National Institute of Standards and
Technology and the National Technical Information Service, shall establish a Pilot Technology
Access Program, for making awards under this section to Small Business Development Centers
(hereinafter in this section referred to as "Centers").
(b)
The Administrator of the Small Business Administration shall establish
competitive, merit-based criteria for the selection of Centers to receive awards on the basis of—
(1)
the ability of the applicant to carry out the purposes described in
subsection (d) in a manner relevant to the needs of industries in the area served by the Center;
(2)
the ability of the applicant to integrate the implementation of this program
with existing Federal and State technical and business assistance resources; and
(3)
the ability of the applicant to continue providing technology access after
the termination of this pilot program.
(c)
To be eligible to receive an award under this section, an applicant shall provide a
matching contribution at least equal to that received under such award, not more than 50 percent
of which may be waived overhead or in-kind contributions.
(d)
Awards made under this section shall be for the purpose of increasing access by
small businesses to on- line data base services that provide technical and business information,
and access to technical experts, in a wide range of technologies, through such activities as—
(1)

defraying the cost of access by small businesses to the data base services;

(2)

training small businesses in the use of the data base services; and

(3)

establishing a public point of access to the data base services.

Activities described in paragraphs (1) through (3) may be carried out through contract with a
private entity.
(e)
this section.

Awards previously made under section 21A of this Act may be renewed under

(f)
Two years after the date on which the first award was issued under section 21A of
this Act, the General Accounting Office shall submit to the Committee on Small Business and
the Committee on Science, Space, and Technology of the House of Representatives and to the
Committee on Small Business and the Committee on Commerce, Science, and Transportation of
the Senate, an interim report on the implementation of the program under such section and this

195

SMALL BUSINESS ACT

section, including the judgments of the participating Centers as to its effect on small business
productivity and innovation.
(g)
Three years after such date, the General Accounting Office shall submit to the
Committee on Small Business and the Committee on Science, Space, and Technology of the
House of Representatives and to the Committee on Small Business and the Committee on
Commerce, Science and Transportation of the Senate, a final report evaluating the effectiveness
of the Program under section 21A and this section in improving small business productivity and
innovation.
(h)
There are authorized to be appropriated to the Small Business Administration $5
million for each of fiscal years 1992 through 1995 to carry out this section, and such amounts
may remain available until expended.
(i)
Centers are encouraged to seek funding from Federal and non-Federal sources
other than those provided for in this section to assist small businesses in the identification of
appropriate technologies to fill their needs, the transfer of technologies from Federal laboratories,
public and private universities, and other public and private institutions, the analysis of
commercial opportunities represented by such technologies, and such other functions as the
development business Planning, market research, and financial packaging required for
commercialization. Insofar as such Centers pursue these activities, Federal agencies are
encouraged to employ these Centers to interface with small businesses for such purposes as
facilitating small business participation in Federal procurement and fostering commercialization
of Federally- funded research and development.
§ 29.

WOMEN’S BUSINESS CENTER PROGRAM.
(a)

DEFINITIONS - In this section—

(1)
the term “Assistant Administrator” means the Assistant Administrator of
the Office of Women’s Business Ownership established under subsection (g);
(2)
the term “private nonprofit organization” means an entity that is described
in section 501(c) of the Internal Revenue Code of 1986 and exempt from taxation under section
501(a) of such Code;
(3)
the term “small business concern owned and controlled by women”, either
startup or existing, includes any small business concern—
(A)

that is not less than 51 percent owned by 1 or more women; and

(B)
the management and daily business operations of which are
controlled by 1 or more women; and
(4)

the term “women’s business center site” means the location of—

196

SMALL BUSINESS ACT

(A)

a women’s business center; or

(B)
1 or more women’s business centers, established in conjunction
with another women’s business center in another location within a State or region—
(i)

that reach a distinct population that would otherwise not be

(ii)

whose services are targeted to women; and

served;

(iii)
whose scope, function, and activities are similar to those of
the primary women’s business center or centers in conjunction with which it was established.
(b)
AUTHORITY.—The Administration may provide financial assistance to private
nonprofit organizations to conduct 5-year projects for the benefit of small business concerns
owned and controlled by women. The projects shall provide—
(1)
financial assistance, including training and counseling in how to apply for
and secure business credit and investment capital, preparing and presenting financial statements,
and managing cash flow and other financial operations of a business concern;
(2)
management assistance, including training and counseling in how to Plan,
organize, staff, direct, and control each major activity and function of a small business concern;
and
(3)
marketing assistance, including training and counseling in identifying and
segmenting domestic and international market opportunities, preparing and executing marketing
Plans, developing pricing strategies, locating contract opportunities, negotiating contracts, and
utilizing varying public relations and advertising techniques.
(c)

CONDITIONS OF PARTICIPATION—

(1)
NON-FEDERAL CONTRIBUTIONS.—As a condition of receiving
financial assistance authorized by this section, the recipient organization shall agree to obtain,
after its application has been approved and notice of award has been issue, cash contributions
from non-Federal sources as follows:
(A)

in the first and second years, 1 non-Federal dollar for each 2

(B)

in the third, fourth, and fifth years, 1 non-Federal dollar for each

Federal dollars; and

Federal dollar.
(2)
FORM OF NON-FEDERAL CONTRIBUTIONS.—Not more than onehalf of the non-Federal sector matching assistance may be in the form of in-kind contributions
that are budget line items only, including office equipment and office space.

197

SMALL BUSINESS ACT

(3)
FORM OF FEDERAL CONTRIBUTIONS.—The financial assistance
authorized pursuant to this section may be made by grant, contract, or cooperative agreement and
may contain such provision, as necessary, to provide for payments in lump sum or installments,
and in advance or by way of reimbursement. The Administration may disburse up to 25 percent
of each year’s Federal share awarded to a recipient organization after notice of the award has
been issued and before the non-Federal sector matching funds are obtained.
(4)
FAILURE TO OBTAIN NON-FEDERAL FUNDING.—If any recipient
of assistance fails to obtain the required non-Federal contribution during any project, it shall not
be eligible thereafter for advance disbursements pursuant to paragraph (3) during the remainder
of that project, or for any other project for which it is or may be funded by the Administration,
and prior to approving assistance to such organization for any other projects, the Administration
shall specifically determine whether the Administration believes that the recipient will be able to
obtain the requisite non-Federal funding and enter a written finding setting forth the reasons for
making such determination.
(d)
CONTRACT AUTHORITY.—A women’s business center may enter into a
contract with a Federal department or agency to provide specific assistance to wo men and other
underserved small business concerns. Performance of such contract should not hinder the
women's business centers in carrying out the terms of the grant received by the women's business
centers from the Administration.
(e)
SUBMISSION OF 5-YEAR PLAN.—Each applicant organization initially shall
submit a 5-year Plan to the Administration on proposed fundraising and training activities, and a
recipient organization may receive financial assistance under this program for a maximum of 5
years per women's business center site.
(f)
CRITERIA.—The Administration shall evaluate and rank applicants in
accordance with predetermined selection criteria that shall be stated in terms of relative
importance. Such criteria and their relative importance shall be made publicly available and
stated in each solicitation for applications made by the Administration. The criteria shall
include—
(1)
the experience of the applicant in conducting programs or ongoing efforts
designed to impart or upgrade the business skills of women business owners or potential owners;
(2)
the present ability of the applicant to commence a project within a
minimum amount of time;
(3)
the ability of the applicant to provide training and services to a
representative number of women who are both socially and economically disadvantaged; and
(4)

the location for the women's business center site proposed by the

applicant.

198

SMALL BUSINESS ACT

(g)

OFFICE OF WOMEN’S BUSINESS OWNERSHIP—

(1)
ESTABLISHMENT.—There is established within the Administratio n an
Office of Women’s Business Ownership, which shall be responsible for the administration of the
Administration’s programs for the development of women's business enterprises (as defined in
section 408 of the Women’s Business Ownership Act of 1988 (15 U.S.C. 631 note)). The Office
of Women’s Business Ownership shall be administered by an Assistant Administrator, who shall
be appointed by the Administrator.
(2)
ASSISTANT ADMINISTRATOR OF THE OFFICE OF WOMEN’S
BUSINESS OWNERSHIP—
(A)
QUALIFICATIONS.—The position of Assistant Administrator
shall be a Senior Executive Service position under section 3132(a)(2) of title 5, United States
Code. The Assistant Administrator shall serve as a noncareer appointee (as defined in section
3132(a)(7) of that title).
(B)

RESPONSIBILITIES AND DUTIES—

(i)
RESPONSIBILITIES.—The responsibilities of the
Assistant Administrator shall be to administer the programs and services of the Office of
Women’s Business Ownership established to assist women entrepreneurs in the areas of—

(ii)

(I)

starting and operating a small business;

(II)

development of management and technical skills;

(III)

seeking Federal procurement opportunities; and

(IV)

increasing the opportunity for access to capital.

DUTIES.—The Assistant Administrator shall—
(I)

administer and manage the Women's Business

Center program;
(II)
recommend the annual administrative and program
budgets for the Office of Women’s Business Ownership (including the budget for the Women's
Business Center program);
(III)

establish appropriate funding levels therefore;

(IV) review the annual budgets submitted by each
applicant for the Women's Business Center program;

199

SMALL BUSINESS ACT

(V)

select applicants to participate in the program under

(VI)

implement this section;

this section

(VII) maintain a clearinghouse to provide for the
dissemination and exchange of information between women's business centers;
(VIII) serve as the vice chairperson of the Interagency
Committee on Women’s Business Enterprise;
(IX)

serve as liaison for the National Women’s Business

(X)

advise the Administrator on appointments to the

Council; and

Women’s Business Council.
(C)
CONSULTATION REQUIREMENTS - In carrying out the
respons ibilities and duties described in this paragraph, the Assistant Administrator shall confer
with and seek the advice of the Administration officials in areas served by the women's business
centers.
(h)

PROGRAM EXAMINATION.—
(1)

IN GENERAL.—The Administration shall—

(A)
develop and implement an annual programmatic and financial
examination of each women’s business center established pursuant to this section, pursuant to
which each such center shall provide to the Administration—
(i)
an itemized cost breakdown of actual expenditures for costs
incurred during the preceding year; and
(ii)
documentation regarding the amount of matching
assistance from non-Federal sources obtained and expended by the center during the preceding
year in order to meet the requirements of subsection (c) and, with respect to any in-kind
contributions described in subsection (c)(2) that were used to satisfy the requirements of
subsection (c), verification of the existence and valuation of those contributions; and
(B)
analyze the results of each such examination and, based on that
analysis, make a determination regarding the programmatic and financial viability of each
women’s business center.
(2)
CONDITIONS FOR CONTINUED FUNDING.—In determining whether
to award a contract (as a sustainability grant) under subsection (l) or to renew a contract (either

200

SMALL BUSINESS ACT

as a grant or cooperative agreement) under this section with a women’s business center, the
Administration—
(A)
shall consider the results of the most recent examination of the
center under paragraph (1); and
(B)

may withhold such award or renewal, if the Administration

determines that—
(i)
the center has failed to provide any information required to
be provided under clause (i) or (ii) of paragraph (1)(A), or the information provided by the center
is inadequate; or
(ii)
the center has failed to provide any information required to
be provided by the center for purposes of the report of the Administration under subsection (j), or
the information provided by the center is inadequate.
(i)
CONTRACT AUTHORITY.—The authority of the Administrator to enter into
contracts shall be in effect for each fiscal year only to the extent and in the amounts as are
provided in advance in appropriations Acts. After the Administrator has entered into a contract,
either as a grant or a cooperative agreement, with any applicant under this section, it shall not
suspend, terminate, or fail to renew or extend any such contract unless the Administrator
provides the applicant with written notification setting forth the reasons therefore and affords the
applicant an opportunity for a hearing, appeal, or other administrative proceeding under chapter
5 of title 5, United States Code.
(j)

MANAGEMENT REPORT.—

(1)
IN GENERAL.—The Administration shall prepare and submit to the
Committees on Small Business of the House of Representatives and the Senate a report on the
effectiveness of all projects conducted under this section.
(2)
CONTENTS.—Each report submitted under paragraph (1) shall include
information concerning, with respect to each women’s business center established pursuant to
this section—
(A)

the number of individuals receiving assistance;

(B)

the number of startup business concerns formed;

(C)

the gross receipts of assisted concerns;

(D)

the employment increases or decreases of assisted concerns;

(E)
to the maximum extent practicable, increases or decreases in
profits of assisted concerns; and

201

SMALL BUSINESS ACT

(F)
the most recent analysis, as required under subsection (h)(1)(B),
and the subsequent determination made by the Administration under that subsection.
(k)

AUTHORIZATION OF APPROPRIATIONS—

(1)
IN GENERAL.—There is authorized to be appropriated, to remain
available until the expiration of the pilot program under subsection (l)—

(2)

(A)

$12,000,000 for fiscal year 2000;

(B)

$12,800,000 for fiscal year 2001;

(C)

$13,700,000 for fiscal year 2002; and

(D)

$14,500,000 for fiscal year 2003.

USE OF AMOUNTS.—

(A)
IN GENERAL.—Except as provided in subparagraph (B),
amounts made available under this subsection for fiscal year 1999, and each fiscal year
thereafter, may only be used for grant awards and may not be used for costs incurred by the
Administration in connection with the management and administration of the program under this
section.
(B)
EXCEPTIONS.—Of the amount made available under this
subsection for a fiscal year, the following amounts shall be available for selection panel costs,
post-award conference costs, and costs related to monitoring and oversight:
(i)

For fiscal year 2000, 2 percent.

(ii)

For fiscal year 2001, 1.9 percent.

(iii)

For fiscal year 2002, 1.9 percent.

(iv)

For fiscal year 2003, 1.6 percent.

(3)
EXPEDITED ACQUISITION.—Notwithstanding any other provision of
law, the Administrator, acting through the Assistant Administrator, may use such expedited
acquisition methods as the Administrator determines to be appropriate to carry out this section,
except that the Administrator shall ensure that all small business sources are provided a
reasonable opportunity to submit proposals.
(4)
PROGRAM.—

RESERVATION OF FUNDS FOR SUSTAINABILITY PILOT

202

SMALL BUSINESS ACT

(A)
IN GENERAL.—Subject to subparagraph (B), of the total amount
made available under this subsection for a fiscal year, the following amounts shall be reserved
for sustainability grants under subsection (l):
(i)

For fiscal year 2000, 17 percent.

(ii)

For fiscal year 2001, 18.8 percent.

(iii)

For fiscal year 2002, 30.2 percent.

(iv)

For fiscal year 2003, 30.2 percent.

(B)
USE OF UNAWARDED FUNDS FOR SUSTAINABILITY
PILOT PROGRAM GRANTS.—If the amount reserved under subparagraph (A) for any fiscal
year is not fully awarded to private nonprofit organizations described in subsection (l)(1)(B), the
Administration is authorized to use the unawarded amount to fund additional women’s business
center sites or to increase funding of existing women’s business center sites under subsection (b).
(l)

SUSTAINABILITY PILOT PROGRAM.—

(1)
IN GENERAL.—There is established a 4-year pilot program under which
the Administration is authorized to award grants (referred to in this section as “sustainability
grants”) on a competitive basis for an additional 5-year project under this section to any private
nonprofit organization (or a division thereof)—
(A)
that has received financial assistance under this section pursuant to
a grant, contract, or cooperative agreement; and
(B)

that—
(i)

is in the final year of a 5-year project; or

(ii)
has completed a project financed under this section (or any
predecessor to this section) and continues to provide assistance to women entrepreneurs.
(2)
CONDITIONS FOR PARTICIPATION.—In order to receive a
sustainability grant, an organization described in paragraph (1) shall submit to the
Administration an application, which shall include—
(A)

a certification that the applicant—
(i)

is a private nonprofit organization;

(ii)

employs a full-time executive director or program manager

to manage the center; and

203

SMALL BUSINESS ACT

(iii)

as a condition of receiving a sustainability grant, agrees—

(I)
to a site visit as part of the final selection process
and to an annual programmatic and financial examination; and
(II)
to the maximum extent practicable, to remedy any
problems identified pursuant to that site visit or examination;
(B)
information demonstrating that the applicant has the ability and
resources to meet the needs of the market to be served by the women’s business center site for
which a sustainability grant is sought, including the ability to fundraise;
(C)
information relating to assistance provided by the women’s
business center site for which a sustainability grant is sought in the area in which the site is
located, including—
(i)

the number of individuals assisted;

(ii)

the number of hours of counseling, training, and workshops

(iii)

the number of startup business concerns formed;

provided; and

(D)

information demonstrating the effective experience of the applicant

in—
(i)
conducting financial, management, and marketing
assistance programs, as described in paragraphs (1), (2), and (3) of subsection (b), designed to
impart or upgrade the business skills of women business owners or potential owners;
(ii)
providing training and services to a representative number
of women who are both socially and economically disadvantaged;
(iii)

using resource partners of the Administration and other

(iv)

complying with the cooperative agreement of the applicant;

entities, such as universities;

and
(v)
the prudent management of finances and staffing, including
the manner in which the performance of the applicant compared to the business Plan of the
applicant and the manner in which grant funds awarded under subsection (b) were used by the
applicant; and
(E)
a 5-year Plan that projects the ability of the women’s business
center site for which a sustainability grant is sought—

204

SMALL BUSINESS ACT

(i)
to serve women business owners or potential owners in the
future by improving fundraising and training activities; and
(ii)
to provide training and services to a representative number
of women who are both socially and economically disadvantaged.
(3)

REVIEW OF APPLICATIONS.—
(A)

IN GENERAL.—The Administration shall—

(i)
review each application submitted under paragraph (2)
based on the information provided in subparagraphs (D) and (E) of that paragraph, and the
criteria set forth in subsection (f);
(ii)
as part of the final selection process, conduct a site visit at
each women’s business center for which a sustainability grant is sought; and
(iii)
approve or disapprove applications for sustainability grants
simultaneously with applications for grants under subsection (b).
(B)
DATA COLLECTION.—Consistent with the annual report to
Congress under subsection (j), each women’s business center site that is awarded a sustainability
grant shall, to the maximum extent practicable, collect information relating to—
(i)

the number of individuals assisted;

(ii)

the number of hours of counseling and training provided

(iii)

the number of startup business concerns formed;

(iv)

any available gross receipts of assisted concerns; and

(v)

the number of jobs created, maintained, or lost at assisted

and workshops conducted;

concerns.
(C)
RECORD RETENTION.—The Administration shall maintain a
copy of each application submitted under this subsection for not less than 10 years.
(4)

NON-FEDERAL CONTRIBUTION.—

(A)
IN GENERAL.—Notwithstanding any other provision of this
section, as a condition of receiving a sustainability grant, an organization described in paragraph
(1) shall agree to obtain, after its application has been approved under paragraph (3) and notice
of award has been issued, cash and in-kind contributions from non-Federal sources for each year

205

SMALL BUSINESS ACT

of additional program participation in an amount equal to 1 non-Federal dollar for each Federal
dollar.
(B)
FORM OF NON-FEDERAL CONTRIBUTIONS.—Not more than
50 percent of the non-Federal assistance obtained for purposes of subparagraph (A) may be in
the form of in-kind contributions that are budget line items only, including office equipment and
office space.
(5)
TIMING OF REQUESTS FOR PROPOSALS..—In carrying out this
subsection, the Ad ministration shall issue requests for proposals for women’s business centers
applying for the pilot program under this subsection simultaneously with requests for proposals
for grants under subsection (b).
(m)

Continued Funding for Centers—

(1)
IN GEN ERAL.—A nonprofit organization described in paragraph (2)
shall be eligible to receive, subject to paragraph (3), a 3-year grant under this subsection.
(2)
APPLICABILITY.—A nonprofit organization described in this paragraph
is a non profit organization that has received funding under subsection (b) or (l).
(3)

APPLICATION AND APPROVAL CRITERIA.—

(A)
CRITERIA.—Subject to subparagraph (B), the Administrator shall
develop and publish criteria for the consideration and approval of applications by nonprofit
organizations under this subsection.
(B)
CONTENTS.—Except as otherwise provided in this subsection,
the conditions for participation in the grant program under this subsection shall be the same as
the conditions for participation in the program under subsection (l), as in effect on the date of
enactment of this Act.
(C)
NOTIFICATION.—Not later than 60 days after the date of the
deadline to submit applications for each fiscal year, the Administrator shall approve or deny any
application under this subsection and notify the applicant for each application.
(4)

AWARD OF GRANTS.—

(A)
IN GENERAL.—Subject to the availability of appropriations, the
Administrator shall make a grant for the Federal share of the cost of activities described in the
application to each applicant approved under this subsection.
(B)
AMOUNT.—A grant under this subsection shall be for not more
than $150,000, for each year of that grant.

206

SMALL BUSINESS ACT

(C)
FEDERAL SHARE.—The Federal share under this subsection
shall not be more than 50 percent.
(D)
PRIORITY.—In allocating funds made available for grants under
this section, the Administrator shall give applications under this subsection or subsection (l)
priority over first-time applications under subsection (b).
(5)

RENEWAL.—

(A)
IN GENERAL.—The Administrator may renew a grant under this
subsection for additional 3- year periods, if the nonprofit organization submits an application for
such renewal at such time, in such manner, and accompanied by such information as the
Administrator may establish.
(B)
UNLIMITED RENEWALS.—There shall be no limitation on the
number of times a grant may be renewed under subparagraph (A).
(n)

Privacy Requirements.—

(1)
IN GENERAL.—A women’s business center may not disclose the name,
address, or telephone number of any individual or small business concern receiving assistance
under this section without the consent of such individual or small business concern, unless—
(A)
the Administrator is ordered to make such a disclosure by a court
in any civil or criminal enforcement action initiated by a Federal or State agency; or
(B)
the Administrator considers such a disclosure to be necessary for
the purpose of conducting a financial audit of a women’s business center, but a disclosure under
this subparagraph shall be limited to the information necessary for such audit.
(2)

ADMINISTRATION USE OF INFORMATION.—This subsection shall

not—
(A)

restrict Administration access to program activity data; or

(B)
prevent the Administration from using client information (other
than the information described in subparagraph (A)) to conduct client surveys.
(3)
REGULATIONS.—The Administrator shall issue regulations to establish
standards for requiring disclosures during a financial audit under paragraph (1)(B).
(m)

Continued Funding for Centers—

(1)
IN GENERAL.—A nonprofit organization described in paragraph (2)
shall be eligible to receive, subject to paragraph (3), a 3-year grant under this subsection.

207

SMALL BUSINESS ACT

(2)
APPLICABILITY.—A nonprofit organization described in this paragraph
is a non profit organization that has received funding under subsection (b) or (l).
(3)

APPLICATION AND APPROVAL CRITERIA.—

(A)
CRITERIA.—Subject to subparagraph (B), the Administrator shall
develop and publish criteria for the consideration and approval of applications by nonprofit
organizations under this subsection.
(B)
CONTENTS.—Except as otherwise provided in this subsection,
the conditions for participation in the grant program under this subsection shall be the same as
the conditions for participation in the program under subsection (l), as in effect on the date of
enactment of this Act.
(C)
NOTIFICATION.—Not later than 60 days after the date of the
deadline to submit applications for each fiscal year, the Administrator shall approve or deny any
application under this subsection and notify the applicant for each application.
(4)

AWARD OF GRANTS.—

(A)
IN GENERAL.—Subject to the availability of appropriations, the
Administrator shall make a grant for the Federal share of the cost of activities described in the
application to each applicant approved under this subsection.
(B)
AMOUNT.—A grant under this subsection shall be for not more
than $150,000, for each year of that grant.
(C)
FEDERAL SHARE.—The Federal share under this subsection
shall not be more than 50 percent.
(D)
PRIORITY.—In allocating funds made available for grants under
this section, the Administrator shall give applications under this subsection or subsection (l)
priority over first-time applications under subsection (b).
(5)

RENEWAL.—

(A)
IN GENERAL.—The Administrator may renew a grant under this
subsection for additional 3- year periods, if the nonprofit organization submits an application for
such renewal at such time, in such manner, and accompanied by such information as the
Administrator may establish.
(B)
UNLIMITED RENEWALS.—There shall be no limitation on the
number of times a grant may be renewed under subparagraph (A).
(n)

Privacy Requirements.—

208

SMALL BUSINESS ACT

(1)
IN GENERAL.—A women’s business center may not disclose the name,
address, or telephone number of any individual or small business concern receiving assistance
under this section without the consent of such individual or small business concern, unless—
(A)
the Administrator is ordered to make such a disclosure by a court
in any civil or criminal enforcement action initiated by a Federal or State agency; or
(B)
the Administrator considers such a disclosure to be necessary for
the purpose of conducting a financial audit of a women’s business center, but a disclosure under
this subparagraph shall be limited to the information necessary for such audit.
(2)

ADMINISTRATION USE OF INFORMATION.—This subsection shall

not—
(A)

restrict Administration access to program activity data; or

(B)
prevent the Administration from using client information (other
than the information described in subparagraph (A)) to conduct client surveys.
(3)
REGULATIONS.—The Administrator shall issue regulations to establish
standards for requiring disclosures during a financial audit under paragraph (1)(B).
§ 30.

OVERSIGHT OF REGULATORY ENFORCEMENT.
(a)

DEFINITIONS.—For purposes of this section, the term—

(1)
"Board" means a Regional Small Business Regulatory Fairness Board
established under subsection (c); and
(2)
"Ombudsman" means the Small Business and Agriculture Regulatory
Enforcement Ombudsman designated under subsection (b).
(b)

SBA ENFORCEMENT OMBUDSMAN.—

(1)
Not later than 180 days after the date of enactment of this section, the
Administrator shall designate a Small Business and Agriculture Regulatory Enforcement
Ombudsman, who shall report directly to the Administrator, utilizing personnel of the Small
Business Administration to the extent practicable. Other agencies shall assist the Ombudsman
and take actions as necessary to ensure compliance with the requirements of this section.
Nothing in this section is intended to replace or diminish the activities of any Ombudsman or
similar office in any other agency.
(2)

The Ombudsman shall—

209

SMALL BUSINESS ACT

(A)
work with each agency with regulatory authority over small
businesses to ensure that small business concerns that receive or are subject to an audit, on-site
inspection, compliance assistance effort, or other enforcement related communication or contact
by agency personnel are provided with a means to comment on the enforcement activity
conducted by such personnel;
(B)
establish means to receive comments from small business concerns
regarding actions by agency employees conducting compliance or enforcement activities with
respect to the small business concern, means to refer comments to the Inspector General of the
affected agency in the appropriate circumstances, and otherwise seek to maintain the identity of
the person and small business concern making such comments on a confidential basis to the
same extent as employee identities are protected under section 7 of the Inspector General Act of
1978 (5 U.S.C. App.);
(C)
based on substantiated comments received from small business
concerns and the Boards, annually report to Congress and affected agencies evaluating the
enforcement activities of agency personnel including a rating of the responsiveness to small
business of the various regional and program offices of each agency;
(D)
coordinate and report annually on the activities, findings and
recommendations of the Boards to the Administrator and to the heads of affected agencies; and
(E)
provide the affected agency with an opportunity to comment on
draft reports prepared under subparagraph (C), and include a section of the final report in which
the affected agency may make such comments as are not addressed by the Ombudsman in
revisions to the draft.
(c)

REGIONAL SMALL BUSINESS REGULATO RY FAIRNESS BOARDS.—

(1)
Not later than 180 days after the date of enactment of this section, the
Administrator shall establish a Small Business Regulatory Fairness Board in each regional office
of the Small Business Administration.
(2)

Each Board established under paragraph (1) shall—

(A)
meet at least annually to advise the Ombudsman on matters of
concern to small businesses relating to the enforcement activities of agencies;
(B)
report to the Ombudsman on substantiated instances of excessive
enforcement actions of agencies against small business concerns including any findings or
recommendations of the Board as to agency enforcement policy or practice; and
(C)
prior to publication, provide comment on the annual report of the
Ombudsman prepared under subsection (b).

210

SMALL BUSINESS ACT

(3)
Each Board shall consist of five members, who are owners, operators, or
officers of small business concerns, appointed by the Administrator, after receiving the
recommendations of the chair and ranking minority member of the Committees on Small
Business of the House of Representatives and the Senate. Not more than three of the Board
members shall be of the same political party. No member shall be an officer or employee of the
Federal Government, in either the executive branch or the Congress.
(4)
Members of the Board shall serve at the Pleasure of the Administrator for
terms of three years or less.
(5)
The Administrator shall select a chair from among the members of the
Board who shall serve at the Pleasure of the Administrator for not more than 1 year as chair.
(6)
A majority of the members of the Board shall constitute a quorum for the
conduct of business, but a lesser number may hold hearings.
(d)

POWERS OF THE BOARDS.

(1)
The Board may hold such hearings and collect such information as
appropriate for carrying out this section.
(2)
The Board may use the United States mails in the same manner and under
the same conditions as other departments and agencies of the Federal Government.
(3)
The Board may accept donations of services necessary to conduct its
business, provided that the donations and their sources are disclosed by the Board.
(4)
Members of the Board shall serve without compensation, provided that,
members of the Board shall be allowed travel expenses, including per diem in lieu of
subsistence, at rates authorized for employees of agencies under subchapter I of chapter 57 of
title 5, United States Code, while away from their homes or regular Places of business in the
performance of services for the Board.
§ 31.

HUBZONE PROGRAM

(a)
IN GENERAL.—There is established within the Administration a program to be
carried out by the Administrator to provide for Federal contracting assistance to qualified
HUBZone small business concerns in accordance with this section.
(b)

ELIGIBLE CONTRACTS—
(1)

DEFINITIONS .—In this subsection—

(A)
the term “contracting officer” has the meaning given that term in
section 27(f)(5) of the Office of Federal Procurement Policy Act (41 U.S.C. 423(f)(5); and

211

SMALL BUSINESS ACT

(B)
the term “full and open competition” has the meaning given that
term in section 4 of the Office of Federal Procurement Policy Act (41 U.S.C. 403).
(2)
AUTHORITY OF CONTRACTING OFFICER.—Notwithstanding any
other provision of law—
(A)
a contracting officer may award sole source contracts under this
section to any qualified HUBZone small business concern, if—
(i)
the qualified HUBZone small business concern is
determined to be a responsible contractor with respect to performance of such contract
opportunity, and the contracting officer does not have a reasonable expectation that 2 or more
qualified HUBZone small business concerns will submit offers for the contracting opportunity;
(ii)

the anticipated award price of he contract (including

options) will not exceed—
(I)
$5,000,000, in the case of a contract opportunity
assigned a standard industrial classification code for manufacturing; or
(II)

$3,000,000, in the case of all other contract

opportunities; and
(iii)
in the estimation of the contracting officer, the contract
award can be made at a fair and reasonable price;
(B)
a contract opportunity shall be awarded pursuant to this section on
the basis of competition restricted to qualified HUBZone small business concerns if the
contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small
business concerns will submit offers and that the award can be made at a fair market price; and
(C)
not later than 5 days from the date the Administration is notified of
a procurement officer’s decision not to award a contract opportunity under this section to a
qualified HUBZone small business concern, the Administrator may notify the contracting officer
of the intent to appeal the contracting officer’s decision, and within 15 days of such date the
Administrator may file a written request for reconsideration of the contracting officer’s decision
with the Secretary of the department or agency head.
(3)
PRICE EVALUATION PREFERENCE IN FULL AND OPEN
COMPETITIONS.—
(A)
IN GENERAL.—Subject to subparagraph (B), in any case in
which a contract is to be awarded on the basis of full and open competition, the price offered by
a qualified HUBZone small business concern shall be deemed as being lower than the price
offered by another offeror (other than another small business concern), if the price offered by the

212

SMALL BUSINESS ACT

qualified HUBZone small business concern is not more than 10 percent higher than the price
offered by the otherwise lowest, responsive, and responsible offeror.
(B)
PROCUREMENT OF COMMODITIES.—For purchases by the
Secretary of Agriculture of agricultural commodities, the price evaluation preferences shall be—
(i)
10 percent, for the portion of a contract to be awarded that
is not greater than 25 percent of the total volume being procured for each commodity in a single
invitation;
(ii)
5 percent, for the portion of a contract to be awarded that is
greater than 25 percent, but not greater than 40 percent, of the total volume being procured fo r
each commodity in a single invitation; and
(iii)
zero, for the portion of a contract to be awarded that is
greater than 40 percent of the total volume being procured for each commodity in a single
invitation.
(C)
PROCUREMENT OF COMMODITIES FOR INTERNATIONAL
FOOD AID EXPORT OPERATIONS.—The price evaluation preference for purchases of
agricultural commodities by the Secretary of Agriculture for export operations through
international food aid programs administered by the Farm Service Agency shall be 5 percent on
the first portion of a contract to be awarded that is not greater than 20 percent of the total volume
of each commodity being procured in a single invitation.
(D)
TREATMENT OF PREFERENCE.—A contract awarded to a
HUBZone small business concern under a preference described in subparagraph (B) shall not be
counted toward the fulfillment of any requirement partially set aside for competition restricted to
small business concerns.
(4)
RELATIONSHIP TO OTHER CONTRACTING PREFERENCES.—A
procurement may not be made from a source on the basis of a preference provided in paragraph
(2) or (3), if the procurement would otherwise be made from a different source under section
4124 or 4125 of title 18, United States Code, or the Javits-Wagner-O’Day Act (41 U.S.C. 46 et
seq.).
(c)

ENFORCEMENT; PENALTIES—

(1)
VERIFICATION OF ELIGIBILITY.—In carrying out this section, the
Administrator shall establish procedures relating to—
(A)
the filing, investigation, and disposition by the Administration of
any challenge to the eligibility of a small business concern to receive assistance under this
section (including a challenge, filed by an interested party, relating to the veracity of a
certification made or information provided to the Administration by a small business concern
under section 3(p)(5); and

213

SMALL BUSINESS ACT

(B)
verification by the Administrator of the accuracy of any
certification made or information provided to the Administration by a small business concern
under section 3(p)(5).
(2)
EXAMINATIONS.—The procedures established under paragraph (1) may
provide for program examinations (including random program examinations) by the
Administrator of any small business concern making a certification or providing information to
the Administrator under section 3(p)(5).
(3)
PROVISION OF DATA.—Upon the request of the Administrator, the
Secretary of Labor, the Secretary of Housing and Urban Development, and the Secretary of the
Interior (or the Assistant Secretary for Indian Affairs), shall promptly provide to the
Administrator such information as the Administrator determines to be necessary to carry out this
subsection.
(4)
PENALTIES.—In addition to the penalties described in section 16(d), any
small business concern that is determined by the Administrator to have misrepresented the status
of that concern as a “HUBZone small business concern” for purposes of this section, shall be
subject to—
(A)

section 1001 of title 18, United States Code; and

(B)

sections 3729 through 3733 of title 31, United States Code.

(d)
AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be
appropriated to carry out the program established by this section $10,000,000 for each of fiscal
years 2004 through 2006.
§ 32.

VETERANS PROGRAMS.

(a)
OFFICE OF VETERANS BUSINESS DEVELOPMENT.—There is established
in the Administration an Office of Veterans Business Development, which shall be administered
by the Associate Administrator for Veterans Business Development (in this section referred to as
the “Associate Administrator”) appointed under section 4(b)(1).
(b)
ASSOCIATE ADMINISTRATOR FOR VETERANS BUSINESS
DEVELOPMENT.—The Associate Administrator—
(1)

shall be an appointee in the Senior Executive Service;

(2)
shall be responsible for the formulation, execution, and promotion of
policies and programs of the Administration that provide assistance to small business concerns
owned and controlled by veterans and small business concerns owned and controlled by servicedisabled veterans. The Associate Administrator shall act as an ombudsman for full consideration
of veterans in all programs of the Administration; and

214

SMALL BUSINESS ACT

(3)

shall report to and be responsible directly to the Administrator.

(c)
AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be
appropriated to carry out this section—

§ 33.

(1)

$1,500,000 for fiscal year 2005; and

(2)

$2,000,000 for fiscal year 2006.

NATIONAL VETERANS BUSINESS DEVELOPMENT CORPORATION.

(a)
ESTABLISHMENT.—There is established a federally chartered corporation to be
known as the Nationa l Veterans Business Development Corporation (in this section referred to as
the “Corporation”) which shall be incorporated under the laws of the District of Columbia and
which shall have the powers granted in this section. Notwithstanding any other provision of law,
the Corporation is a private entity and is not an agency, instrumentality, authority, entity, or
establishment of the United States Government.
(b)

PURPOSES OF THE CORPORATION.—The purposes of the Corporation shall

be—
(1)
to expand the provision of and improve access to technical assistance
regarding entrepreneurship for the Nation’s veterans; and
(2)
to assist veterans, including service-disabled veterans, with the formation
and expansion of small business concerns by working with and organizing public and private
resources, including those of the Small Business Administration, the Department of Veterans
Affairs, the Department of Labor, the Department of Commerce, the Department of Defense, the
Service Corps of Retired Executives (described in section 8(b)(1)(B) of this Act), the Small
Business Development Centers (described in section 21 of this Act), and the business
development staffs of each department and agency of the United States.
(c)

BOARD OF DIRECTORS.—

(1)
IN GENERAL.—The management of the Corporation shall be vested in a
Board of Directors composed of nine voting members and three nonvoting ex officio members.
(2)
APPOINTMENT OF VOTING MEMBERS.—The President shall, after
considering recommendations which shall be proposed by the Chairmen and Ranking Members
of the Committees on Small Business and the Committees on Veterans Affairs of the House of
Representatives and the Senate, appoint United States citizens to be voting members of the
Board, not more than five of who m shall be members of the same political party.

215

SMALL BUSINESS ACT

(3)
EX OFFICIO MEMBERS.—The Administrator of the Small Business
Administration, the Secretary of Defense, and the Secretary of Veterans Affairs shall serve as the
nonvoting ex officio members of the Board of Directors.
(4)
INITIAL APPOINTMENTS.—The initial members of the Board of
Directors shall be appointed non later than 60 days after the date of enactment of this Act.
(5)
CHAIRPERSON.—The members of the Board of Directors appointed
under paragraph (2) shall elect one such member to serve as chairperson of the Board of
Directors for a term of 2 years.
(6)

TERMS OF APPOINTED MEMBERS.—

(A)
IN GENERAL.—Each member of the Board of Directors
appointed under paragraph (2) shall serve a term of 6 years, except as provided in subparagraph
(B).
(B)
TERMS OF INITIAL APPOINTEES.—As designated by the
President at the time of appointment, of the members first appointed—
(i)

three shall be for a term of 2 years; and

(ii)

three shall be for a term of 4 years.

(C)
UNEXPIRED TERMS.—Any member of the board of Directors
appointed to fill a vacancy occurring before the expiration of the term for which the member’s
predecessor was appointed shall be appointed only for the remainder of the term. A member
may serve after the expiration of that member’s term until a successor has taken office.
(7)
VACANCIES.—Any vacancy on the Board of Directors shall be filled in
the manner in which the original appointment was made. In the case of a vacancy in the office of
the Administrator of the Small Business Administration or the Secretary of Veterans Affairs, and
pending the appointment of a successor, an acting appointee for such vacancy may serve as an ex
officio member.
(8)
INELIGIBILITY FOR OTHER OFFICES.—No voting member of the
Board of directors may be an officer or employee of the United States while serving as a member
of the Board of Directors or during the 2-year period preceding such service.
(9)
IMPARTIALITY AND NONDISCRIMINATION.—The Board of
Directors shall administer the affairs of the Corporation fairly and impartially and without
discrimination.
(10) OBLIGATIONS AND EXPENSES.—The Board of Directors shall
prescribe the manner in which the obligations of the Corporation may be incurred and in which
its expenses shall be allowed and paid.

216

SMALL BUSINESS ACT

(11) QUORUM.—Five voting members of the Board of Directors shall
constitute a quorum, but a lesser number may hold hearings.
(d)
CORPORATE POWERS.—On October 1, 1999, the Corporation shall become a
body corporate and as such shall have the authority to do the following:
(1)

To adopt and use a corporate seal.

(2)

To have succession until dissolved by an Act of Congress.

(3)

To make contracts or grants.

(4)

To sue and be sued, and to file and defend against lawsuits in State or

Federal court.
(5)
To appoint, through the actions of its Board of Directors, officers and
employees of the Corporation, to define their duties and responsibilities, fix their compensations,
and to dismiss at will such officers or employees.
(6)
To prescribe, through the actions of its Board of Directors, bylaws not
inconsistent with Federal law and the law of the State of incorporation, regulating the manner in
which its general business may be conducted and the manner in which the privileges granted to it
by law may be exercised.
(7)
To exercise, through the actions of its Board of Directors or duly
authorized officers, all powers specifically granted by the provisions of this section, and such
incidental powers as shall be necessary.
(8)
local organizations.

To solicit, receive, and disburse funds from private, Federal, State and

(9)
To accept and employ or dispose of in furtherance of the purposes of this
section any money or property, real, personal, or mixed, tangible or intangible, received by gift,
devise, bequest, or otherwise.
(10)
(e)

To accept voluntary and uncompensated services.

CORPORATE FUNDS.—

(1)
DEPOSIT OF FUNDS.—The board of Directors shall deposit all funds of
the Corporation in federally chartered and insured depository institutions until such funds are
disbursed under paragraph (2).
(2)
DISBURSEMENT OF FUNDS.—Funds of the Corporation may be
disbursed only for purposes that are—

217

SMALL BUSINESS ACT

(A)

approved by the Board of Directors by a recorded vote with a

(B)

in accordance with the purposes of the Corporation as specified in

quorum present; and

subsection (b).
(f)
NETWORK OF INFORMATION AND ASSISTANCE CENTERS.—In carrying
out the purpose described in subsection (b), the Corporation shall establish and maintain a
network of information and assistance centers for use by veterans and the public.
(g)
ANNUAL REPORT.—On or before October 1 of each year, the Board of
Directors shall transmit a report to the President and the Congress describing the activities and
accomplishments of the Corporation for the preceding year and the Corporation’s findings
regarding the efforts of Federal, State and private organizations to assist veterans in the
formation and expansion of small business concerns.
(h)
ASSUMPTION OF DUTIES OF ADVISORY COMMITTEE.—On October 1,
2006, the Corporation established under this section shall assume the duties, responsibilities, and
authority of the Advisory Committee on Veterans Affairs established under section 203 of this
Act.
(i)
USE OF MAILS.—The Corporation may use the United States mails in the same
manner and under the same conditions as the departments and agencies of the United States.
(j)

PROFESSIONAL CERTIFICATION ADVISORY BOARD.—

(1)
IN GENERAL.—Acting through the Board of Directors, the Corporation
shall establish a Professional Certification Advisory Board to create uniform guidelines and
standards for the professional certification of members of the Armed Services to aid in their
efficient and orderly transition to civilian occupations and professions and to remove potential
barriers in the areas of licensure and certification.
(2)
MEMBERSHIP.—The members of the Advisory Board shall serve
without compensation, shall meet in the District of Columbia no less than quarterly, and shall be
appointed by the Board of Directors as follows:
(A)
PRIVATE SECTOR MEMBERS.—The Corporation shall appoint
not less than seven members for terms of 2 years to represent private sector organizations and
associations, including the American Association of Community Colleges, the Society for
Human Resource Managers, the Coalition for Professional Certification, the Council on
Licensure and Enforcement, and the American Legion.
(B)
PUBLIC SECTOR MEMBERS.—The Corporation shall invite
public sector members to serve at the discretion of their departments or agencies and shall—

218

SMALL BUSINESS ACT

(i)
encourage the participation of the Under Secretary of
Defense for Personnel and Readiness;
(ii)
encourage the participation of two officers from each
branch of the Armed Forces to represent the Training Commands of their branch; and
(iii)
seek the participation and guidance of the Assistant
Secretary of Labor for Veterans’ Employment.
(k)

AUTHORIZATION OF APPROPRIATIONS.—

(1)
IN GENERAL.—Subject to paragraph (2), there are authorized to be
appropriated to the Corporation to carry out this section—

(2)

(A)

$4,000,000 for fiscal year 2001;

(B)

$4,000,000 for fiscal year 2002;

(C)

$2,000,000 for fiscal year 2003; and

(D)

$2,000,000 for fiscal year 2004.

MATCHING REQUIREMENT.—

(A)
FISCAL YEAR 2002.—The amount made available to the
Corporation for fiscal year 2002 may not exceed twice the amount that the Corporation certifies
that it will provide for that fiscal year from sources other than the Federal Government.
(B)
SUBSEQUENT FISCAL YEARS.—The amount made available
to the Corporation for fiscal year 2003 or 2004 may not exceed the amount that the Corporation
certifies that it will provide for that fiscal year from sources other than the Federal Government.
(3)
PRIVATIZATION.—The Corporation shall institute and implement a
Plan to raise private funds and become a self-sustaining corporation.
§ 34.

FEDERAL AND STATE TECHNOLOGY PARTNERSHIP PROGRAM.
(a)

DEFINITIONS.—In this section and section 35, the following definitions apply:

(1)
APPLICANT.—The term “applicant” means an entity, organization, or
individual that submits a proposal for an award or a cooperative agreement under this section.
(2)
BUSINESS ADVICE AND COUNSELING.—The term “business advice
and counseling” means provide advice and assistance on matters described in section 35(c)(2)(B)
to small business concerns to guide them through the SBIR and STTR program process, from
application to award and successful completion of each phase of the program.

219

SMALL BUSINESS ACT

(3)
FAST PROGRAM.—The term “FAST program” means the Federal and
State Technology Partnership Program established under this section.
(4)

MENTOR.—The term “mentor” means an individual described in section

35(c)(2).
(5)
MENTORING NETWORK.—The term “Mentoring Network” means an
association, organization, coalition, or other entity (including an individual) that meets the
requirements of section 35(c).
(6)
RECIPIENT.—The term “recipient” means a person that receives an
award or becomes party to a cooperative agreement under this section.
(7)
in section 9(e)(4).

SBIR PROGRAM.—The term “SBIR program” has the same meaning as

(8)
STATE.—The term “State” means each of the several States, the District
of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American
Samoa.
(9)
in section 9(e)(6).

STTR PROGRAM.—The term STTR program” has the same meaning as

(b)
ESTABLISHMENT OF PROGRAM.—The Administrator shall establish a
program to be known as the Federal and State Technology Partnership Program, the purpose of
which shall be to strengthen the technological competitiveness of small business concerns in the
States.
(c)

GRANTS AND COOPERATIVE AGREEMENTS.—

(1)
JOINT REVIEW.—In carrying out the FAST program under this section,
the Administrator and the SBIR program managers at the National Science Foundation and the
Department of Defense shall jointly review proposals submitted by applicants and may make
awards or enter into cooperative agreements under this section based on the factors for
consideration set forth in paragraph (2), in order to enhance or develop in a State—
(A)
(B)
small business concerns;
(C)

technology research and development by small business concerns;
technology transfer from university research to technology-based

technology deployment and diffusion benefiting small business

concerns;

220

SMALL BUSINESS ACT

(D)
the technological capabilities of small business concerns through
the establishment or operation of consortia comprised of entities, organizations, or individuals,
including—
(i)

State and local development agencies and entities;

(ii)

representatives of technology-based small business

(iii)

industries and emerging companies;

(iv)

universities; and

(v)

small business development centers; and

concerns;

(E)
outreach, financial support, and technical assistance to technologybased small business concerns participating in or interested in participating in an SBIR program,
including initiatives—
(i)
to make grants or loans to companies to pay a portion or all
of the cost of developing SBIR proposals;
(ii)
to establish or operate a Mentoring Network within the
FAST program to provide business advice and counseling that will assist small business
concerns that have been identified by FAST program participants, program managers of
participating SBIR agencies, the Administration, or other entities that are knowledgeable about
the SBIR and STTR programs as good candidates for the SBIR and STTR programs, and that
would benefit from mentoring, in accordance with section 35;
(iii)
to create or participate in a training program for individuals
providing SBIR outreach and assistance at the State and local levels; and
(iv)
to encourage the commercialization of technology
developed through SBIR program funding.
(2)
SELECTION CONSIDERATIONS.—In making awards or entering into
cooperative agreements under this section, the Administrator and the SBIR program managers
referred to in paragraph (1)—
(A)
may only consider proposals by applicants that intend to use a
portion of the Federal assistance provided under this section to provide outreach, financial
support, or technical assistance to technology-based small business concerns participating in or
interested in participating in the SBIR program; and
(B)

shall consider, at a minimum—

221

SMALL BUSINESS ACT

(i)
whether the applicant has demonstrated that the assistance
to be provided would address unmet needs of small business concerns in the community, and
whether it is important to use Federal funding for the proposed activities;
(ii)
whether the applicant has demonstrated that a need exists to
increase the number or success of small high-technology businesses in the State, as measured by
the number of first phase and second phase SBIR awards that have historically been received by
small business concerns in the State;
(iii)

whether the projected costs of the proposed activities are

reasonable;
(iv)
whether the proposal integrates and coordinates the
proposed activities with other State and local programs assisting small high- technology firms in
the State; and
(v)
of the activities to be conducted.
(vi)

the manner in which the applicant will measure the results

whether the proposal addresses the needs of small business

concerns—
(I)

owned and controlled by women;

(II)

owned and controlled by minorities; and

(III) located in areas that have historically not
participated in the SBIR and STTR programs.
(3)
PROPOSAL LIMIT.—Not more than 1 proposal may be submitted for
inclusion in the FAST program under this section to provide services in any one State in any 1
fiscal year.
(4)
PROCESS.—Proposals and applications for assistance under this section
shall be in such form and subject to such procedures as the Administrator shall establish. The
Administrator shall promulgate regulations establishing standards for the consideration of
proposals under paragraph (2), including standards regarding each of the considerations
identified in paragraph (2)(B).
(d)
COOPERATION AND COORDINATION.—In carrying out the FAST program
under this section, the Administrator shall cooperate and coordinate with—
(1)

Federal agencies required by section 9 to have an SBIR program; and

(2)
entities, organizations, and individuals actively engaged in enhancing or
developing the technological capabilities of small business concerns, including—

222

SMALL BUSINESS ACT

(A)

State and local development agencies and entities;

(B)
State committees established under the Experimental Program to
Stimulate Competitive Research of the National Science Foundation (as established under
section 113 of the National Science Foundation Authorization Act of 1988 (42 U.S.C. 1862g));

(e)

(C)

State science an technology councils; and

(D)

representatives of technology-based small business concerns.

ADMINISTRATIVE REQUIREMENTS.—

(1)
COMPETITIVE BASIS.—Awards and cooperative agreements under this
section shall be made or entered into, as applicable, on a competitive basis.
(2)

MATCHING REQUIREMENTS.—

(A)
IN GENERAL.—The non-Federal share of the cost of an activity
(other than a Planning activity) carried out using an award or under a cooperative agreement
under this section shall be—
(i)
50 cents for each Federal dollar, in the case of a recipient
that will serve small business concerns located in one of the 18 States receiving the fewest SBIR
first phase awards (as described in section 9(e)(4)(A));
(ii)
except as provided in subparagraph (B), 1 dollar for each
Federal dollar, in the case of a recipient that will serve small business concerns located in one of
the 16 States receiving the greatest number of such SBIR first phase awards; and
(iii)
except as provided in subparagraph (B), 75 cents for each
Federal dollar, in the case of a recipient that will serve small business concerns located in a State
that is not described in clause (i) or (ii) that is receiving such SBIR first phase awards.
(B)
LOW-INCOME AREAS.—The non-Federal share of the cost of
the activity carried out using an award or under a cooperative agreement under this section shall
be 50 cents for each Federal dollar that will be directly allocated by a recipient described in
subparagraph (A) to serve small business concerns located in a qualified census tract, as that
term is defined in section 42(d)(5)(C)(ii) of the Internal Revenue Code of 1986. Federal dollars
not so allocated by that recipient shall be subject to the matching requirements of subparagraph
(A).
(C)
TYPES OF FUNDING.—The non-Federal share of the cost of an
activity carried out by a recipient shall be comprised of not less than 50 percent cash and not
more than 50 percent of indirect costs and in-kind contributions, except that no such costs or
contributions may be derived from funds from any other Federal program.

223

SMALL BUSINESS ACT

(D)
RANKINGS.—For purposes of subparagraph (A), the
Administrator shall reevaluate the ranking of a State once every 2 fiscal years, beginning with
fiscal year 2001, based on the most recent statistics compiled by the Administrator.
(3)
DURATION.—Awards may be made or cooperative agreements entered
into under this section for multiple years, not to exceed 5 years in total.
(f)

REPORTS.—

(1)
INITIAL REPORT.—Not later tha n 120 days after the date of enactment
of the Small Business Innovation Research Program Reauthorization Act of 2000, the
Administrator shall prepare and submit to the Committee on Small Business of the Senate and
the Committee on Science and the Committee on Small Business of the House of
Representatives a report, which shall include, with respect to the FAST program, including
Mentoring Networks—
(A)

a description of the structure and procedures of the program;

(B)

a management Plan for the program; and

(C)

a description of the merit-based review process to be used in the

program.
(2)
ANNUAL REPORTS.—The Administrator shall submit an annual report
to the Committee on Small Business of the Senate and the Committee on Science and the
Committee on Small Business of the House of Representatives regarding—
(A)
the number and amount of awards provided and cooperative
agreements entered into under the FAST program during the preceding year;
(B)
a list of recipients under this section, includ ing their location and
the activities being performed with the awards made or under the cooperative agreements entered
into; and
(C)
the Mentoring Networks and the mentoring database, as provided
for under section 35, including—
(i)
the status of the inclusion of mentoring information in the
database required by section 9(k); and
(ii)
usage of the Mentoring Networks.
(g)

the status of the implementation and description of the

REVIEWS BY INSPECTOR GENERAL.—

224

SMALL BUSINESS ACT

(1)
IN GENERAL.—The Inspector General of the Administration shall
conduct a review of—
(A)
the extent to which recipients under the FAST program are
measuring the performance of the activities being conducted and the results of such
measurements; and
(B)

the overall management and effectiveness of the FAST program.

(2)
REPORT.—During the first quarter of fiscal year 2004, the Inspector
General of the Administration shall submit a report to the Committee on Small Business of the
Senate and the Committee on Science and the Committee on Small Business of the House of
Representatives on the review conducted under paragraph (1).
(h)

PROGRAM LEVELS.—

(1)
IN GENERAL.—There is authorized to be appropriated to carry out the
FAST program, including Mentoring Networks, under this section and section 35, $10,000,000
for each of fiscal years 2001 through 2005.
(2)
MENTORING DATABASE.—Of the total amount made available under
paragraph (1) for fiscal years 2001 through 2005, a reasonable amount, not to exceed a total of
$500,000, may be used by the Administration to carry out section 35(d).
(i)
TERMINATION.—The authority to carry out the FAST program under this
section shall terminate on September 30, 2005.
§ 35.

MENTORING NETWORKS.
(a)

FINDINGS.—Congress finds that—

(1)
the SBIR and STTR programs create jobs, increase capacity for
technological innovation, and boost international competitiveness;
(2)
increasing the quantity of applications from all States to the SBIR and
STTR programs would enhance competition for such awards and the quality of the completed
projects; and
(3)
mentoring is a natural complement to the FAST program of reaching out
to new companies regarding the SBIR and STTR programs as an effective and low-cost way to
improve the likelihood that such companies will succeed in such programs in developing and
commercializing their research.
(b)
AUTHORIZATION FOR MENTORING NETWORKS.—The recipient of an
award or participant in a cooperative agreement under section 34 may use a reasonable amount
of such assistance for the establishment of a Mentoring Network under this section.

225

SMALL BUSINESS ACT

(c)
CRITERIA FOR MENTORING NETWORKS.—A Mentoring Network
established using assistance under section 34 shall—
(1)
provide business advice and counseling to high technology small business
concerns located in the State or region served by the Mentoring Network and identified under
section 34(c)(1)(E)(ii) as potential candidates for the SBIR or STTR programs;
(2)

identify volunteer mentors who—

(A)
are persons associated with a small business concern that has
successfully completed one or more SBIR or STTR funding agreements; and
(B)
have agreed to guide small business concerns through all stages of
the SBIR or STTR program process, including providing assistance relating to—
(i)

proposal writing;

(ii)

marketing;

(iii)

Government accounting;

(iv)

Government audits;

(v)

project facilities and equipment;

(vi)

human resources;

(vii)

third phase partners;

(viii)

commercialization;

(ix)

venture capital networking; and

(x)

other matters relevant to the SBIR and STTR programs;

(3)
have experience working with small business concerns
participating in the SBIR and STTR programs;
(4)

contribute information to the national database referred to in

subsection (d); and
(5)
agree to reimburse volunteer mentors for out-of-pocket expenses
related to service as a mentor under this section.
(d)

MENTORING DATABASE.—The Administrator shall—

226

SMALL BUSINESS ACT

(1)
include in the database required by section 9(k)(1), in cooperation with the
SBIR, STTR, and FAST programs, information on Mentoring Networks and mentors
participating under this section, including a description of their areas of expertise;
(2)

work cooperatively with Mentoring Networks to maintain and update the

database;
(3)
take such action as may be necessary to aggressively promote Mentoring
Networks under this section; and
(4)

fulfill the requirements of this subsection either directly or by contract.

§ 36. PROCUREMENT PROGRAM FOR SMALL BUSINESS CONCERNS OWNED AND
CONTROLLED BY SERVICE-DISABLED VETERANS.
(a)
SOLE SOURCE CONTRACTS.—In accordance with this section, a contracting
officer may award a sole source contract to any small business concern owned and controlled by
service-disabled veterans if—
(1)
such concern is determined to be a responsible contractor with respect to
performance of such contract opportunity and the contracting officer does not have a reasonable
expectation that 2 or more small business concerns owned and controlled by service-disabled
veterans will submit offers for the contracting opportunity;
(2)

the anticipated award price of the contract (including options) will not

exceed—
(A)
$5,000,000, in the case of a contract opportunity assigned a
standard industrial classification code for manufacturing; or
(B)

$3,000,000, in the case of any other contract opportunity; and

(3)
in the estimation of the contracting officer, the contract award can be
made at a fair and reasonable price.
(b)
RESTRICTED COMPETITION.—In accordance with this section, a contracting
officer may award contracts on the basis of competition restricted to small business concerns
owned and controlled by service-disabled veterans if the contracting officer has a reasonable
expectation that not less than 2 small business concerns owned and controlled by servicedisabled veterans will submit offers and that the award can be made at a fair market price.
(c)
RELATIONSHIP TO OTHER CONTRACTING PREFERENCES.—A
procurement may not be made from a source on the basis of a preference provided under
subsection (a) or (b) if the procurement would otherwise be made from a different source under

227

SMALL BUSINESS ACT

section 4124 or 4125 of title 18, United States Code, or the Javits-Wagner-O’Day Act (41 U.S.C.
46 et seq.).
(d)
ENFORCEMENT; PENALTIES.—Rules similar to the rules of paragraphs (5)
and (6) of section 8(m) shall apply for purposes of this section.
(e)
CONTRACTING OFFICER.—For purposes of this section, the term “contracting
officer” has the meaning given such term in section 27(f)(5) of the Office of Federal
Procurement Policy Act (41 U.S.C. 423(f)(5)).
§ 37. All laws and parts of laws inconsistent with this Act are hereby repealed to the extent of
such inconsistency.

228