House Passes FY2019 National Defense Authorization Act With Important Small Business Provisions

The House of Representatives passed the FY2019 National Defense Authorization Act by a vote of 351 to 66, prior to congressional recess. The annual defense spending measure would allow the Pentagon to spend $686 billion in the 2019 fiscal year. The legislation included important small business provisions:

Technical Assistance for Small Business: The Department of Defense (DOD) is directed to develop a small business strategy that would include a unified management structure for small business programs. DOD would also be responsible for outlining how they will engage in outreach and technical assistance to facilitate small business participation in defense programs.

Prompt Payment: The Department of Defense (DOD) is directed to accelerate payments to small business prime contractors and subcontractors, with the goal of making payment within 15 days of receiving an invoice.

Adjustments: Solicitations for small business contracts would have to include information about the agency’s policies and performance in responding to requests for compensation changes.

Expansion of Microloan Program: The loan limit in the SBA’s microloan program would be increased from $5 million to $6 million after a recipient’s first year of participation. The program allows intermediary lenders to provide loans for business development, as well as marketing, management, and technical assistance, to minority-owned or disadvantaged small businesses. Another change is the time allocation for technical assistance providers. Intermediaries could spend as much as 50% (instead of the current 25%) of their grant funds to provide information and technical assistance to prospective borrowers.

Increased Investment Limit for Small Business Investment Companies (SBICs): Banks and savings associations could invest as much as 15% of their capital and surplus in small business investment companies (SBICs) if approved by federal banking regulators. The limit is currently 5%. The maximum amount of leverage available to SBICs would be increased to $175 million from $150 million.

SBIR/STTR: Federal agencies are directed to set aside a share of their research budget for the Small Business Innovation Research program (SBIR). Agencies with larger research budgets must also set funds aside for the Small Business Technology Transfer program (STTR). This provision would allow federal agencies to use as much as 3% of reserved funds for program administration. It would also allow all agencies with SBIR programs in FY2018 through FY2022 to provide phase II grants, which focus on development and delivery of an innovation, regardless of whether a small business had first received a phase I grant for initial research.

Broadband & Information Technology: The SBA’s Office of Investment and Innovation is directed to designate an employee as the broadband and emerging information technology coordinator. They would be responsible for connecting small businesses with financing programs, and advising these businesses on how to acquire broadband and new information technology.

The Senate Armed Services Committee has approved their FY2019 legislation. The full Senate is expected to begin debate on the bill in the next week or two.

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