Mr. KERRY . Mr. President, I would like to thank Armed Services Committee Chairman Levin and Ranking Member Warner for their assistance on this amendment to the National Defense Authorization Act for Fiscal Year 2002. My amendment, cosponsored by Senator Bond, will help small businesses more effectively compete for large and/or bundled contracts.
Everyone knows that small businesses are vital to the U.S. economy, accounting for 99 percent of all private sector employers, providing 75 percent of all net new jobs, and accounting for 51 percent of private-sector output. But what many of my colleagues may not realize is the vital role small businesses play in providing competition and innovation to our Federal procurement system. In fact, a major reason for the creation of the Small Business Administration was to ensure an adequate private sector base for the Department of Defense. It was actually deemed in our national security interests to have a thriving small business sector. And this has not changed, it is actually more important than ever, not just to our national security, but to our economic security as well.
The amendment is based on our legislation, the ``Small Business Procurement Competition Act of 2001,'' and begins with one simple premise that has been proven time and again, when it comes to large Federal contracts, small businesses are at a competitive disadvantage because of the amounts of money involved and the large geographic areas these contracts may serve. The practice known as contract bundling, whereby separate procurement contracts are combined into one contract, has resulted in small businesses that do business with the Federal Government being placed at an even greater disadvantage. Unfortunately, procurement streamlining has resulted in the practice of contract bundling becoming more and more common.
In fact, for Fiscal Year 2000, the Federal Government failed to meet its goal of 23 percent of Federal prime contracts being awarded to small businesses. Many experts blame the inability of small businesses to compete on large bundled contracts as a key factor in this decline. For example, the Small Business Administration's Office of Advocacy believes that for every $100 awarded on a bundled contract, there was a decrease of $33 to small businesses.
The Small Business Procurement Competition Act that has been included in this bill will address this decline in two ways. First, it draws on an existing principle known as ``joint ventures'' and expands the ability of small businesses to form them. Second, it raises the percentage of contracts that a small business can subcontract to other small businesses.
Joint ventures, whereby small businesses can team together to bid on a bundled contract, even if the combined entity is too large to be considered a small business, is not a new concept. In fact, the Clinton Administration began to remove some of the obstacles to the formation of joint ventures. Our amendment takes this initiative, cements it into law, and makes several improvements to help and encourage the formation of joint ventures.
Many small businesses have said that they like the idea of being able to team with other small businesses to compete on bundled contracts, but they often don't know where to begin. Worse, many small businesses have said that, despite U.S. law, many contracts that should be considered bundled contracts are not, which has limited their ability to form joint ventures.
To combat these deficiencies, our amendment allows for the formation of a small business-only joint venture to bid on any contract over the amount of $5 million, regardless of whether or not the contract is bundled. To combat the knowledge gap on this issue, our legislation requires that the Small Business Administration, SBA , set up a database of companies that are actively seeking to form joint ventures. The legislation also sets up a pilot program requiring the SBA to conduct outreach and education efforts to small businesses that want to form joint ventures.
Joint ventures are not the only means to help small businesses compete for bundled contracts. Our amendment also changes the subcontracting requirements for small businesses. Under current law, a small business must perform at least 51 percent of the work on a contract to maintain its small business eligibility. Under our provision, a small business can subcontract up to 2/3 of the work to other small businesses on bundled contract, provided the prime small business contractor performs the greatest proportion of the work. In this way, small businesses can bid on larger contracts that they do not have the capacity to perform on their own.
Small businesses are vital to the economic growth of the U.S. economy. Their innovations, the competition they provide and the jobs they create are just some of the reasons we must ensure the success of our small businesses. Taken together, these provisions will help small businesses by providing them with more opportunities to compete for Federal contracts and help maintain the national supply chain.
As the Chairman of the Senate Committee on Small Business and Entrepreneurship, I have made it a priority to ensure small businesses receive their fair share of Federal procurement contracts. This legislation is an important step in fulfilling that promise.
I would also like to thank Senator Bond for his work on another amendment to the National Defense Authorization Act, which I am a cosponsor of, to make some changes to the procurement provisions pertaining to small business in this legislation. I believe it is an important amendment and I am pleased we were able to get it included in the bill.
Once again, I would like to thank Senator Bond for joining me in this effort, as well as Senator Levin and Senator Warner for their assistance and their courtesy.
Everyone knows that small businesses are vital to the U.S. economy, accounting for 99 percent of all private sector employers, providing 75 percent of all net new jobs, and accounting for 51 percent of private-sector output. But what many of my colleagues may not realize is the vital role small businesses play in providing competition and innovation to our Federal procurement system. In fact, a major reason for the creation of the Small Business Administration was to ensure an adequate private sector base for the Department of Defense. It was actually deemed in our national security interests to have a thriving small business sector. And this has not changed, it is actually more important than ever, not just to our national security, but to our economic security as well.
The amendment is based on our legislation, the ``Small Business Procurement Competition Act of 2001,'' and begins with one simple premise that has been proven time and again, when it comes to large Federal contracts, small businesses are at a competitive disadvantage because of the amounts of money involved and the large geographic areas these contracts may serve. The practice known as contract bundling, whereby separate procurement contracts are combined into one contract, has resulted in small businesses that do business with the Federal Government being placed at an even greater disadvantage. Unfortunately, procurement streamlining has resulted in the practice of contract bundling becoming more and more common.
In fact, for Fiscal Year 2000, the Federal Government failed to meet its goal of 23 percent of Federal prime contracts being awarded to small businesses. Many experts blame the inability of small businesses to compete on large bundled contracts as a key factor in this decline. For example, the Small Business Administration's Office of Advocacy believes that for every $100 awarded on a bundled contract, there was a decrease of $33 to small businesses.
The Small Business Procurement Competition Act that has been included in this bill will address this decline in two ways. First, it draws on an existing principle known as ``joint ventures'' and expands the ability of small businesses to form them. Second, it raises the percentage of contracts that a small business can subcontract to other small businesses.
Joint ventures, whereby small businesses can team together to bid on a bundled contract, even if the combined entity is too large to be considered a small business, is not a new concept. In fact, the Clinton Administration began to remove some of the obstacles to the formation of joint ventures. Our amendment takes this initiative, cements it into law, and makes several improvements to help and encourage the formation of joint ventures.
Many small businesses have said that they like the idea of being able to team with other small businesses to compete on bundled contracts, but they often don't know where to begin. Worse, many small businesses have said that, despite U.S. law, many contracts that should be considered bundled contracts are not, which has limited their ability to form joint ventures.
To combat these deficiencies, our amendment allows for the formation of a small business-only joint venture to bid on any contract over the amount of $5 million, regardless of whether or not the contract is bundled. To combat the knowledge gap on this issue, our legislation requires that the Small Business Administration, SBA , set up a database of companies that are actively seeking to form joint ventures. The legislation also sets up a pilot program requiring the SBA to conduct outreach and education efforts to small businesses that want to form joint ventures.
Joint ventures are not the only means to help small businesses compete for bundled contracts. Our amendment also changes the subcontracting requirements for small businesses. Under current law, a small business must perform at least 51 percent of the work on a contract to maintain its small business eligibility. Under our provision, a small business can subcontract up to 2/3 of the work to other small businesses on bundled contract, provided the prime small business contractor performs the greatest proportion of the work. In this way, small businesses can bid on larger contracts that they do not have the capacity to perform on their own.
Small businesses are vital to the economic growth of the U.S. economy. Their innovations, the competition they provide and the jobs they create are just some of the reasons we must ensure the success of our small businesses. Taken together, these provisions will help small businesses by providing them with more opportunities to compete for Federal contracts and help maintain the national supply chain.
As the Chairman of the Senate Committee on Small Business and Entrepreneurship, I have made it a priority to ensure small businesses receive their fair share of Federal procurement contracts. This legislation is an important step in fulfilling that promise.
I would also like to thank Senator Bond for his work on another amendment to the National Defense Authorization Act, which I am a cosponsor of, to make some changes to the procurement provisions pertaining to small business in this legislation. I believe it is an important amendment and I am pleased we were able to get it included in the bill.
Once again, I would like to thank Senator Bond for joining me in this effort, as well as Senator Levin and Senator Warner for their assistance and their courtesy.
