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Statements on Introduced Bills and Joint Resolutions

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STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - January 24, 2005)

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By Mr. KERRY (for himself, Mr. KENNEDY, Mrs. MURRAY, Mr. LAUTENBERG, Mr. CORZINE, and Ms. CANTWELL):

S. 114. A bill to amend titles XIX and XXI of the Social Security Act to ensure that every uninsured child in America has health insurance coverage, and for other purposes; to the Committee on Finance.

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By Mr. KERRY:

S. 137. A bill to modify the contract consolidation requirements in the Small Business Act, and for other purposes; to the Committee on Small Business and Entrepreneurship.

By Mr. KERRY (for himself and Mr. Bingaman):

S. 138. A bill to make improvements to the microenterprise programs administered by the Small Business Administration; to the Committee on Small Business and Entrepreneurship.

By Mr. KERRY:

S. 139. A bill to amend the Small Business Act to direct the Administrator of the Small Business Administration to establish a vocational and technical entrepreneurship development program; to the Committee on Small Business and Entrepreneurship.

Mr. KERRY. Mr. President, as Ranking Member of the Small Business and Entrepreneurship Committee, today I am introducing a package of bills that will help small business owners with access to loans, business counseling and Federal procurement opportunities. Each of the bills was previously introduced on its own or as part of the Committee's extensive Small Business Administration reauthorization proposal that passed the Senate unanimously last Congress. These are provisions that are necessary for enabling our nation's small businesses to continue to have the resources and tools they need to compete with larger companies. They will help America's budding entrepreneurs continue to seek out business opportunities and continue to start businesses. Enactment of this assistance will show that the Federal government is not there to make the road to success more difficult for small businesses, but to help them where the private sector will not.

Mr. President, the first bill of this package is the Small Business Federal Contractor Safeguard Act. It includes essential contractor protections that were a part of the Small Business Administration reauthorization package that passed the Senate unanimously last Congress but was stalled during negotiations in the House of Representatives. These much-needed protections will help level the playing field for small firms and create a procurement atmosphere that fosters competition, fair access and equal opportunity for smaller entities.

With Federal agencies awarding larger, more complex and more costly contracts, and with less staff at the Small Business Administration and within Agency contracting offices performing oversight, this nation's small businesses and its taxpayers are the ones shouldering the burden when small business goals continue to be unmet. In addition to helping small businesses obtain access to procurement opportunities, these goals are meant to help the government benefit from the cost-savings and innovations small business contractors can often provide.

Significant steps were made during the last Congress to address the challenges of contract bundling; however, it is my belief that passing and implementing binding statutory requirements is the only long-term solution to the on-going problem of contract bundling, also called contract consolidation. The first section of the bill creates a two-tiered approach to preventing unnecessary contract consolidation. Civilian agencies will be required to meet specific standards if they attempt to consolidate contracts above $2 million and additional requirements for those contracts above $5 million. The Department of Defense is required to meet two types of similar requirements for contracts above $5 million and $7 million. The bill also eliminates the use of the term ``contract bundling'' and expands the definition of ``contract consolidation,'' closing a loophole that has been widely used to the detriment of many small businesses.

In addition to increasing opportunities for prime contracts by eliminating unnecessary contract consolidation, this bill addresses another serious problem: the dishonest treatment of small business subcontractors by large business prime contractors. Small businesses have been severely hamstrung by the dishonest practices of some large business prime contracts that delay paying their subcontractors, falsely report their subcontracting plans and use ``bait and switch'' tactics.

This bill holds prime contractors responsible for the validity of subcontracting data, requiring the CEO to certify to the accuracy of the subcontracting report under penalty of law. It also makes the penalties for falsifying data included in subcontracting reports match the current $500,000 penalty for businesses that falsify their status as a small and disadvantaged business. Under this bill, if one intentionally falsifies data as a part of a subcontracting report to a federal Agency, he is defrauding the United States government and will be punished to the full extent of the law.

Finally, the bill requires contracting officers to maintain a database of contract performance that is made available to the small business subcontractor upon completion of the contract. This report can then be used as a record of past performance, building a history that will help successful small firms bid on future Federal prime contracts or subcontracts. Each contracting officer will be empowered to withhold a portion of the payment to the prime contractor until he also receives the completed and accurate performance report. Any material breach of contract that is found will be immediately reported to the Inspector General of that Agency for a complete investigation.

The second bill of this small business legislative package is the SBA Microenterprise Improvements Act. It was also included as part of the Small Business Administration reauthorization package and passed by the Senate unanimously last Congress. I am reintroducing these provisions because they are vital to the microenterprise programs administered by the SBA: the Microloan Program and the Program for Investment in Microentrepreneurs (PRIME).

As I have stated on numerous occasions, I disagree with the Administration's proposals to cut back funding for microloans and training assistance intended to encourage entrepreneurship and foster America's smallest small businesses. And I wholeheartedly disagree with the Administration's ill-founded argument that these borrowers are being, or will be, served through the SBA's 7(a) loan guarantee program. SBA's loan programs are not one-size fits all. The small borrower in the Microloan program is different, and therefore has different needs, than the small business borrower being served through the 7(a) loan program. Both lending vehicles are important, but they are different, and one is not a substitute for the other.

Who are these borrowers being served through the microloan program? Thirty percent are African American; 11 percent are Hispanic; 37 percent are women; and, anywhere from 30 percent to 40 percent go to small businesses in rural areas. Because of their size, the size of the loan they need and their relative inexperience, small businesses borrowers are turned away by banks, and yet the Administration proposed cutting the Microloan program by 36 percent in its fiscal year 2004 budget, and cut all funding in its fiscal year 2005 budget. The SBA needs to fully fund these programs and put more resources into the office that manages the program. Four people are not enough to manage 1,400 loans and 180 grants. To make matters worse, the SBA's long-time manager of micro-enterprise programs, Jody Raskind, is leaving the Agency. All those who support the good work of fostering SBA's Microloan program are sorry to see her go, not only because of her dedication and hard work, but also because they are concerned that the Administration will never really fill the job, letting the programs languish. I urge the Administration to move quickly to fill that position, just as the private sector would, by working with the Microloan community to identify someone who is competent, resourceful and dedicated to monitoring integrity of these programs and fostering their success.

In addition, we need to finally enact some changes to the Microloan program that have passed the Senate several times over the last four years but have yet to pass the full Congress because of unrelated political fights. I urge my colleagues to let us move forward with making these provisions law, once and for all. The first part of the SBA Microenterprise Improvements Act includes many of the provisions passed as part of S. 174, a bill which Senator SNOWE and I introduced in 2001 and the Committee and the full Senate voted to pass by unanimous consent in 2002. As I mentioned earlier, these provisions were also included as part of S.1375, the SBA reauthorization bill that passed the Senate unanimously in 2003. The updates and changes to the Microloan program included in this bill will improve the program in several ways.

First, it will allow intermediaries to make revolving-term loans or longer fixed term loans to small businesses. Currently, intermediaries may only make ``short-term'' loans with fixed terms, which restrict the ability of microlenders to structure loans that meet the needs of certain small enterprises. This will benefit small businesses, the lenders, and the SBA because it will eliminate repeated paperwork and unnecessary administrative burdens. It will help small businesses, such as carpenters, who need revolving loans to finance the jobs as they come in, rather than taking multiple little, fixed-term loans. Second, this bill also contains a change to the Microlenders eligibility. Rather than tying eligibility to the expertise of the entity, this bill makes it possible for new entities to qualify as the SBA microlending intermediaries if they have staffs who are experienced in this unique or specialized lending and technical assistance. This bill also adjusts, reflecting changes in the market, the average smaller size of microloans from $7,500 to $10,000, to make it consistent with similar changes enacted in December 2000. This is important because microloan intermediaries that have a microloan portfolio with an average loan size of not more than $10,000 will now be eligible to receive an interest rate lower than the normal rate extended by the SBA to intermediaries. This bill also changes, from 25 percent to 30 percent, the amount of technical assistance (TA) funds an intermediary can contract with an outside expert and the amount of grants a lender can use to counsel prospective borrowers. In addition, the legislation requires the SBA to report annually on the requirement that states that Agency must contract out 7 percent of its loan dollars for intermediary training.

Last, the SBA Microenterprise Improvements Act, like S.1375, requires the SBA to develop an improved subsidy rate model to determine the cost of microloans. The one the Agency has used since the program's inception does not reflect the performance of the program. For example, in Fiscal Year 2003, the administration's budget doubled the subsidy rate (which is the government's cost of the program) from 6.78 percent to 13.05 percent, even though the program had not experienced any loss of federal funds since the first loan was made in 1992. This broken method of calculating the cost of these loans is a waste of taxpayer money because Congress has to appropriate unnecessary funds to run the program. Now is the time to fix it.

The second part of the SBA Microenterprise Improvements Act also comes from S.1375, but was not included in the small business reauthorization bill that passed Congress last session. It begins by reauthorizing the PRIME program through 2007 and transfers its legislative language from the Riegle Community Development and Regulatory Improvement Act of 1994 to section 37 of the Small Business Act. Additionally, it includes a provision that Senator BINGAMAN and I worked closely to develop that will expand PRIME with a separate $2 million authorization to provide direct, in-depth technical assistance and counseling to disadvantaged Native American small business owners. The rationale for amending the PRIME Act, rather than creating a separate program, is that PRIME is currently operational and simply needs additional targeted efforts and funding so it can better address the needs of the Native American entrepreneurial community. The Bingaman-Kerry approach uses an existing program structure to help find a solution to the long-term economic handicap existing in Native American communities nationwide. There are a number of microenterprise organizations in states across the country that are willing and prepared to take on the additional challenge of assisting disadvantaged Native American entrepreneurs, and there are a number of Native American communities that are eager to explore a different path to economic development. However, there are currently a limited amount of funds to allow that to happen. Again, I commend Senator BINGAMAN for his continued attention to these needs, for his continued support of small business legislation to address them, and for his foresight and vision for Native Americans in New Mexico and across the country. The Native American communities of our nation will be better off with the assistance that this provision makes possible.

Again, it is time to move forward. Out of 66 pages of Small Business Administration reauthorizations and improvements that were slipped into the Omnibus Appropriations bill that passed at the end of the 108th Congress, these non-controversial provisions were included. They should have been.

The third part of the package that I'm introducing today is a reintroduction of the Vocational and Technical Entrepreneurship Development Act. Last Congress, I introduced this important piece of legislation as a companion to H.R. 1387, which bears the same name and was introduced in the House, in the 107th and 108th Congresses, by Congressman ROBERT BRADY of Pennsylvania.

Let me begin by reminding my colleagues that the Small Business Administration's Office of Advocacy states that only half of all small businesses survive past four years and that management and education remain two of the most important ingredients to small business success. We often think that small businesses only need money to succeed, but while adequate financing is vital, so too is careful planning and competent management. Often Americans who work in the trade sector--construction, plumbing, electrical work, etc.--enter these professions with the goal of one day starting their own business; however many of these aspiring entrepreneurs who participate in career training or vocational training in certain trades, unfortunately, fail to obtain the necessary education and ``back room'' management skills to grow and develop their fledgling business. This initiative would develop a program that allows workers within the trades industry to move toward starting a new business by giving them the entrepreneurial skills to successfully manage a small business. Many small businesses fail not because they don't know the industry or make low-quality products or have poor service, but because they don't know the ins and outs of running a successful business.

The purpose of the Vocational and Technical Entrepreneurship Development Act is to assist in the development of curricula that will encourage the successful growth of small businesses. This legislation passed the House in each of the last Congresses, but was not taken up by the full Senate. I hope that the committee and full Senate will act quickly on it now.

The bill, in a business-education partnership, establishes a ``vocational entrepreneurship development demonstration program,'' under which the SBA would provide grants, through the Small Business Development Center network, to provide technical assistance to high school and technical career institutes, vo-tech schools, to promote small business ownership in their curriculum.

The SBDC program is designed to deliver such up-to-date counseling, training and technical assistance in all aspects of small business management and is the ideal vehicle to provide such a program. Each grant awarded under this program will be worth at least $200,000--which, in today's environment where vo-tech programs get shortchanged in government education budgets, can do a great deal to help rebuild a worker-strapped trades industry.

There has been some concern that this legislation will duplicate programs such as those at the Department of Education's Office of Vocational and Adult Education, OVAE, which does provide valuable vocational education. The OVAE, and other such government programs, however, focus on helping workers gain new and updated skills so that they may find employment. In contrast, this legislation is targeted toward turning workers, not into better employees, but into potential employers. Traditional vocational education programs do not provide entrepreneurial training. This is a fundamental difference between this legislation's objective and that of the traditional vocation education provided by the Department of Education. Giving our trades industry professionals the skills to be successful business owners creates better employers and better, long-lasting businesses. This, in turn, will go a long way toward creating additional trade jobs across the country.

I again want to commend Representative BRADY for his years of hard work on behalf of entrepreneurs not just from his home State but on behalf of every trades industry worker who has ever thought of becoming his or her own boss by starting a business.

Mr. President, I urge all of my colleagues to cosponsor and support these three bills.

I ask unanimous consent that the text of the bills be printed in the RECORD.

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