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This bill creates a new federal incentive program that pays prime defense contractors five percent of the subcontract value when they hire small businesses from Pacific Insular Areas—specifically Guam, the Northern Mariana Islands, and American Samoa. The eligible subcontractors must be small businesses that are at least 51 percent owned by U.S. citizens, have their main office in one of these three locations, and employ at least half their workforce locally. The Department of Defense would administer the program through its Office of Small Business Programs, with contractors applying for payments after entering into qualifying subcontracts. The bill requires annual reporting for ten years on how many contractors participate, the economic impact on these Pacific territories, and recommendations for growing the program. The legislation applies to all new defense contracts signed after it becomes law.

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