Failure to achieve small business contracting goals would hit top agency officials in the wallet under legislation proposed by House Small Business Committee Chairman Sam Graves.

The bill would withhold bonuses from senior executives when their agency fails to meet its small business goal. Those annual bonuses often add tens of thousands of dollars to the officials’ paychecks.

Under current law, there are no consequences when an agency falls short of its goal. Small business advocates have long urged Congress to put teeth in the goals. A Democratic congressman, Bill Owens of New York, has proposed cutting an agency’s budget when it missed its goal, but that idea has gained no traction.

Chairman Graves, R-MO, introduced a pair of bills to overhaul small business contracting rules. Another committee Republican, Mick Mulvaney of South Carolina, proposed new restrictions designed to crack down on pass-through contracts. The committee staff is preparing a package of several other contracting bills that will be introduced soon.

The GET Small Business Contracting (Government Efficiency through Small Business Contracting) Act, H.R. 3850, introduced by Graves, would increase the governmentwide small business contracting goal to 25%, from the current 23%. The government has never reached the 23% goal. Graves said the additional 2% could give small firms about $11 billion in new contracts.

At the same time, the bill would make it more difficult for agencies to achieve the goal by eliminating exemptions in contract reporting rules. Agencies would be required to count contracts awarded overseas in calculating their small business performance. In addition, the calculation of small business contracts would include the few agencies, such as the Federal Aviation Administration, that do not operate under the Federal Acquisition Regulation.

The committee staff said those exempted contracts amounted to $100 billion in 2010. Leaving them out of the calculation inflated the official small business market share, which was reported at 22.7%.

Graves’ bill does not change the goals for small disadvantaged, woman-owned, HUBZone or service-disabled veteran-owned businesses.

The bill would also increase the subcontracting goal to 40%, from the present 35.9%.

“This legislation will help provide more opportunities for small businesses, which will help create jobs,” Graves said in a statement.

The Small Business Advocate Act, H.R. 3851, introduced by Graves, requires that all OSDBU directors hold the same rank as the agency’s chief acquisition officer or senior procurement executive and that the OSDBU director have no other duties.

The Subcontracting Transparency and Reliability (STAR) Act, H.R. 3893, introduced by Mulvaney, provides that small businesses could not subcontract more than 50% of the contract value to a large business (85% for construction). There would be no limitations on one small business subcontracting with another, a way of encouraging teaming.

A small contractor violating the rule could be fined $500,000 or the amount of the excessive subcontracts, whichever is greater.

The bill directs that the government’s subcontract reporting system be modified to catch incidents of excessive subcontracting. A prime contractor would have to report its subcontracts every 180 days while the work is in progress.

Before insourcing work done by a small contractor, an agency would have to give public notice and allow time for comment. The agency would have to describe the procedures it used in deciding to insource the work, and small business would be allowed to protest an insourcing decision.

“The STAR Act will help provide an even playing field for many small contractors who otherwise would not have the resources to fight deceitful subcontracting and unjustified insourcing within the federal procurement system,” Mulvaney said.

Other bills set to be introduced shortly are designed to strengthen safeguards against unjustified bundling; to create an SBA mentor-protégé program for small businesses that are not members of one of the designated socioeconomic groups; to remove the $3.5 million cap on set-asides for woman-owned small firms; and to simplify SBA’s rules for setting size standards.