Small Biz Contracting Reforms in NDAA

June 6, 2018

On May 24, the House passed the Fiscal Year (FY) 2019 National Defense Authorization Act, approving their funding plan for the military and mapping out policy priorities. The bill, known as H.R. 5515, passed the House with bipartisan support in a 351 to 66 vote and includes small-business provisions introduced by the House Committee on Small Business.

Versions of the following bills were included in FY19 NDAA:

The Microloan Modernization Act (H.R. 2056)

H.R. 2056 modernizes the U.S. Small Business Administration’s (SBA) Microloan program, which offers small businesses microloans of $50,000 or less through nonprofit lending intermediaries. In addition to providing lending services, the intermediary is also required to provide technical assistance and training to their borrowers and prospective borrowers. H.R. 2056 raises the total limit on outstanding loans held by microloan intermediaries from $5 million to $6 million. Next, the legislation provides flexibility to the 25/75 Rule, which limits a microloan intermediary to using 25 percent of their SBA technical assistance grants on pre-loan assistance or on third-party contracts. The new ratio is 50/50. By giving micro lender intermediaries more latitude with pre-loan assistance, small business startups will receive more comprehensive assistance during their infancy. To gain a better understanding of the program’s utilization, H.R. 2056 directs the SBA to conduct a study on the usage of the program. Finally, the legislation requires a Government Accountability Office (GAO) study to examine SBA’s oversight functions of the program.

The Change Order Transparency for Federal Contractors (H.R. 4754)

H.R. 4754 would provide prospective federal construction contractors and subcontractors with the agency-specific change order information, which many contractors argue is needed to plan their operations prior to submitting a bid on a contract. This could enable contractors to better formulate their bid and prepare for delays in payment during the performance of the contract. The bill also increases transparency in an attempt to encourage agencies to improve their change order process in order to attract the highest-quality contractors at competitive rates.

The Small Business Investment Opportunity Act (H.R. 2333)

H.R. 2333 amends the Small Business Investment Act of 1958 by increasing the Individual Leverage Limit from $150 million to $175 million. The Small Business Administration (SBA) offers the Small Business Investment Company (SBIC) program, which focuses on increasing the availability of venture and private equity capital. The Individual Leverage Limit stipulates how much capital can be deployed to a small business by an SBIC that has only one fund under management. It was last increased in 2009 with the limit increasing from $137 million to the present day limit of $150 million.

The Investing in Main Street America Act (H.R. 2364)

H.R. 2364 increases the amount of capital and surplus that a financial institution and federal savings association can invest in a Small Business Investment Company (SBIC) from 5 percent to 15 percent in order to assist small businesses in obtaining venture capital and private equity.

The Accelerated Payments for Small Businesses Act of 2018 (H.R. 5337)

H.R. 5337 would require the government and prime contractors with small-business subcontractors to establish a goal of paying small-business contractors within 15 days of receiving a proper invoice.

Finally, significant portions of H.R. 2763, the Small Business Innovation Research and Small Business Technology Transfer Improvements Act, were also included in the FY19 NDAA passed by the House.

The same week, the Senate Armed Services Committee wrapped up its subcommittee and full committee markups on its version of the NDAA. Following a full Senate vote to approve their version of the bill, the two chambers will have to work out the differences between their defense bills and pass the compromise language on both sides of the Capitol complex.