15 U.S.C. § 657s — Limitations on subcontracting

Page 1077 TITLE 15—COMMERCE AND TRADE § 657s (iii) qualified HUBZone small business concerns; (iv) small business concerns owned and controlled by socially and economically disadvantaged individuals; or (v) small business concerns owned and controlled by women; (C) describes the type of assistance pro- vided to proteges under each such program; (D) describes the benefits provided to men- tors under each such program; and (E) describes the progress of proteges under each such program with respect to competing for Federal prime contracts and subcontracts. (2) Provision of information The head of each Federal department or agency carrying out a mentor-protege pro- gram shall provide to the Administrator, on an annual basis, the information necessary for the Administrator to submit a report required under paragraph (1). (d) Definitions In this section, the following definitions apply: (1) Mentor The term ‘‘mentor’’ means a for-profit busi- ness concern, of any size, that— (A) has the ability to assist and commits to assisting a protege to compete for Federal prime contracts and subcontracts; and (B) satisfies any other requirements im- posed by the Administrator. (2) Mentor-protege program The term ‘‘mentor-protege program’’ means a program that pairs a mentor with a protege for the purpose of assisting the protege to compete for Federal prime contracts and sub- contracts. (3) Protege The term ‘‘protege’’ means a small business concern that— (A) is eligible to enter into Federal prime contracts and subcontracts; and (B) satisfies any other requirements im- posed by the Administrator. (4) Covered mentor The term ‘‘covered mentor’’ means a mentor that enters into an agreement under this chap- ter, or under any mentor-protege program ap- proved under subsection (b)(1), with a covered protege. (5) Covered protege The term ‘‘covered protege’’ means a protege of a covered mentor that is a Puerto Rico busi- ness. (6) Covered territory mentor The term ‘‘covered territory mentor’’ means a mentor that enters into an agreement under this chapter, or under any mentor-protege pro- gram approved under subsection (b)(1), with a covered territory protege. (7) Covered territory protege The term ‘‘covered territory protege’’ means a protege of a covered territory mentor that is a covered territory business. (e) Current mentor protege agreements Mentors and proteges with approved agree- ment in a program operating pursuant to sub- section (b)(4)(C) shall be permitted to continue their relationship according to the terms speci- fied in their agreement until the expiration date specified in the agreement. (f) Submission of agency plans Agencies operating mentor protege programs pursuant to subsection (b)(4)(C) shall submit the plans specified in subsection (b)(1)(A) to the Ad- ministrator within 6 months of the promulga- tion of rules required by subsection (b)(3). The Administrator shall provide initial comments on each plan within 60 days of receipt, and final ap- proval or denial of each plan within 180 days after receipt. (Pub. L. 85–536, § 2[45], as added Pub. L. 112–239, div. A, title XVI, § 1641(2), Jan. 2, 2013, 126 Stat. 2077; amended Pub. L. 114–328, div. A, title XVIII, § 1813(e), Dec. 23, 2016, 130 Stat. 2653; Pub. L. 115–232, div. A, title VIII, § 861(d), (e), Aug. 13, 2018, 132 Stat. 1896, 1897; Pub. L. 116–283, div. A, title VIII, § 866(c), Jan. 1, 2021, 134 Stat. 3786.) Editorial Notes PRIOR PROVISIONS A prior section 2[45] of Pub. L. 85–536 was renumbered section 2[49] and is set out as a note under section 631 of this title. AMENDMENTS 2021—Subsec. (a)(4). Pub. L. 116–283, § 866(c)(1), added par. (4). Subsec. (b)(3)(A). Pub. L. 116–283, § 866(c)(2), sub- stituted ‘‘relationships—’’ and cls. (i) and (ii) for ‘‘rela- tionships are between a covered protege and covered mentor.’’ Subsec. (d)(6), (7). Pub. L. 116–283, § 866(c)(3), added pars. (6) and (7). 2018—Subsec. (a)(3). Pub. L. 115–232, § 861(d)(1), added par. (3). Subsec. (b)(3)(A). Pub. L. 115–232, § 861(e), inserted ‘‘, except that such restrictions shall not apply to up to 2 mentor-protege relationships if such relationships are between a covered protege and covered mentor’’ after ‘‘each participant’’. Subsec. (d)(4), (5). Pub. L. 115–232, § 861(d)(2), added pars. (4) and (5). 2016—Subsec. (b)(3)(K). Pub. L. 114–328 added subpar. (K). § 657s. Limitations on subcontracting (a) In general If awarded a contract under section 637(a), 637(m), 644(a), 657a, or 657f of this title, a covered small business concern— (1) in the case of a contract for services, may not expend on subcontractors more than 50 percent of the amount paid to the concern under the contract; (2) in the case of a contract for supplies (other than from a regular dealer in such sup- plies), may not expend on subcontractors more than 50 percent of the amount, less the cost of materials, paid to the concern under the con- tract; (3) in the case of a contract described in paragraphs (1) and (2)— (A) shall determine for which category, services (as described in paragraph (1)) or Page 1078 TITLE 15—COMMERCE AND TRADE § 657s supplies (as described in paragraph (2)), the greatest percentage of the contract is award- ed; (B) shall determine the amount awarded under the contract for that category of serv- ices or supplies; and (C) may not expend on subcontractors, with respect to the amount determined under subparagraph (B), more than 50 per- cent of that amount; and (4) in the case of a contract which is prin- cipally for supplies from a regular dealer in such supplies, and which is not a contract principally for services or construction, shall supply the product of a domestic small busi- ness manufacturer or processor, unless a waiv- er of such requirement is granted— (A) by the Administrator, after reviewing a determination by the applicable con- tracting officer that no small business man- ufacturer or processor can reasonably be ex- pected to offer a product meeting the speci- fications (including period for performance) required by the contract; or (B) by the Administrator for a product (or class of products), after determining that no small business manufacturer or processor is available to participate in the Federal pro- curement market. (b) Similarly situated entities Contract amounts expended by a covered small business concern on a subcontractor that is a similarly situated entity shall not be con- sidered subcontracted for purposes of deter- mining whether the covered small business con- cern has violated a requirement established under subsection (a) or (d). (c) Modifications of percentages The Administrator may change, by rule (after providing notice and an opportunity for public comment), a percentage specified in paragraphs (1) through (4) of subsection (a) if the Adminis- trator determines that such change is necessary to reflect conventional industry practices among business concerns that are below the nu- merical size standard for businesses in that in- dustry category. (d) Other contracts (1) In general With respect to a category of contracts to which a requirement under subsection (a) does not apply, the Administrator is authorized to establish, by rule (after providing notice and an opportunity for public comment), a require- ment that a covered small business concern may not expend on subcontractors more than a specified percentage of the amount paid to the concern under a contract in that category. (2) Uniformity A requirement established under paragraph (1) shall apply to all covered small business concerns. (3) Construction projects The Administrator shall establish, through public rulemaking, requirements similar to those specified in paragraph (1) to be applica- ble to contracts for general and specialty con- struction and to contracts for any other indus- try category not otherwise subject to the re- quirements of such paragraph. The percentage applicable to any such requirement shall be determined in accordance with paragraph (1). (e) Definitions In this section, the following definitions apply: (1) Covered small business concern The term ‘‘covered small business concern’’ means a business concern that— (A) with respect to a contract awarded under section 637(a) of this title, is a small business concern eligible to receive con- tracts under that section; (B) with respect to a contract awarded under section 637(m) of this title— (i) is a small business concern owned and controlled by women (as defined in that section); or (ii) is a small business concern owned and controlled by women (as defined in that section) that is not less than 51 per- cent owned by 1 or more women who are economically disadvantaged (and such ownership is determined without regard to any community property law); (C) with respect to a contract awarded under section 644(a) of this title, is a small business concern; (D) with respect to a contract awarded under section 657a of this title, is a qualified HUBZone small business concern; or (E) with respect to a contract awarded under section 657f of this title, is a small business concern owned and controlled by service-disabled veterans. (2) Similarly situated entity The term ‘‘similarly situated entity’’ means a subcontractor that— (A) if a subcontractor for a small business concern, is a small business concern; (B) if a subcontractor for a small business concern eligible to receive contracts under section 637(a) of this title, is such a concern; (C) if a subcontractor for a small business concern owned and controlled by women (as defined in section 637(m) of this title), is such a concern; (D) if a subcontractor for a small business concern owned and controlled by women (as defined in section 637(m) of this title) that is not less than 51 percent owned by 1 or more women who are economically disadvantaged (and such ownership is determined without regard to any community property law), is such a concern; (E) if a subcontractor for a qualified HUBZone small business concern, is such a concern; or (F) if a subcontractor for a small business concern owned and controlled by service-dis- abled veterans, is such a concern. (Pub. L. 85–536, § 2[46], as added Pub. L. 112–239, div. A, title XVI, § 1651, Jan. 2, 2013, 126 Stat. 2079; amended Pub. L. 114–92, div. A, title VIII, § 864(b), Nov. 25, 2015, 129 Stat. 927.) Page 1079 TITLE 15—COMMERCE AND TRADE § 657t 1 So in original. Probably should be ‘‘premises’’. Editorial Notes AMENDMENTS 2015—Subsec. (a)(4). Pub. L. 114–92 substituted ‘‘which is principally for supplies from a regular dealer in such supplies, and which is not a contract principally for services or construction’’ for ‘‘for supplies from a reg- ular dealer in such supplies’’ in introductory provi- sions. Statutory Notes and Related Subsidiaries INAPPLICABILITY OF REQUIREMENT TO REVIEW AND JUSTIFY CERTAIN CONTRACTS Pub. L. 113–66, div. A, title XVI, § 1615, Dec. 26, 2013, 127 Stat. 950, provided that: ‘‘In the case of a contract to which the provisions of section 46 of the Small Busi- ness Act (15 U.S.C. 657s) apply, the requirements under section 802 of the National Defense Authorization Act for Fiscal Year 2013 (Public Law 112–239; 126 Stat. 1824; 10 U.S.C. 2304 note [now 10 U.S.C. note prec.]) do not apply.’’ § 657t. Office of Credit Risk Management (a) Establishment There is established within the Administra- tion the Office of Credit Risk Management (in this section referred to as the ‘‘Office’’). (b) Duties The Office shall be responsible for super- vising— (1) any lender making loans under section 7(a) [15 U.S.C. 636(a)] (in this section referred to as a ‘‘7(a) lender’’); (2) any Lending Partner or Intermediary participant of the Administration in a lending program of the Office of Capital Access of the Administration; and (3) any small business lending company or a non-Federally regulated lender without regard to the requirements of section 650 of this title. (c) Director (1) In general The Office shall be headed by the Director of the Office of Credit Risk Management (in this section referred to as the ‘‘Director’’), who shall be a career appointee in the Senior Exec- utive Service (as defined in section 3132 of title 5). (2) Duties The Director shall be responsible for over- sight of the lenders and participants described in subsection (b), including by conducting periodic reviews of the compliance and per- formance of such lenders and participants. (d) Supervision duties for 7(a) lenders (1) Reviews With respect to 7(a) lenders, an employee of the Office shall— (A) be present for and supervise any such review that is conducted by a contractor of the Office on the premise 1 of the 7(a) lender; and (B) supervise any such review that is not conducted on the premise 1 of the 7(a) lender. (2) Review report timeline (A) In general Notwithstanding any other requirements of the Office or the Administrator, the Ad- ministrator shall develop and implement a review report timeline which shall— (i) require the Administrator to— (I) deliver a written report of the re- view to the 7(a) lender not later than 60 business days after the date on which the review is concluded; or (II) if the Administrator expects to submit the report after the end of the 60- day period described in clause (i), notify the 7(a) lender of the expected date of submission of the report and the reason for the delay; and (ii) if a response by the 7(a) lender is re- quested in a report submitted under sub- paragraph (A), require the 7(a) lender to submit responses to the Administrator not later than 45 business days after the date on which the 7(a) lender receives the re- port. (B) Extension The Administrator may extend the time frame described in subparagraph (A)(i)(II) with respect to a 7(a) lender as the Adminis- trator determines necessary. (e) Enforcement authority against 7(a) lenders (1) Informal enforcement authority The Director may take an informal enforce- ment action against a 7(a) lender if the Direc- tor finds that the 7(a) lender has violated a statutory or regulatory requirement under section 7(a) [15 U.S.C. 636(a)] or any require- ment in a Standard Operating Procedures Manual or Policy Notice related to a program or function of the Office of Capital Access. (2) Formal enforcement authority (A) In general With the approval of the Lender Oversight Committee established under section 657u of this title, the Director may take a formal enforcement action against any 7(a) lender if the Director finds that the 7(a) lender has violated— (i) a statutory or regulatory requirement under section 7(a), including a requirement relating to credit elsewhere; or (ii) any requirement described in a Standard Operating Procedures Manual or Policy Notice, related to a program or function of the Office of Capital Access. (B) Enforcement actions An enforcement action imposed on a 7(a) lender by the Director under subparagraph (A) shall be based on the severity or fre- quency of the violation and may include as- sessing a civil monetary penalty against the 7(a) lender in an amount that is not greater than $250,000. (3) Appeal by lender A 7(a) lender may appeal an enforcement ac- tion imposed by the Director described in this subsection to the Office of Hearings and Ap- peals established under section 634(i) of this title or to an appropriate district court of the United States. (f) Regulations Not later than 1 year after June 21, 2018, the Administrator shall issue regulations, after op-