March 28, 2017

If your U.S. government contract or subcontract contains requirements for a Small Business Subcontracting Plan, you have contractually agreed to maintain specific records for subcontracts resulting in an award of more than $150,000 when acquiring goods and services in performance of the contract.

Any contractor receiving a contract for more than the simplified acquisition threshold (generally $150,000) must agree to provide the maximum practicable opportunity to participate in the contract to small businesses and subtitled small businesses identified as:

  • Veteran-owned small;
  • Service-disabled veteran-owned small;
  • HUBZone small;
  • Small disadvantaged; and
  • Small women-owned.

The Federal Acquisition Regulation (FAR) clause at FAR 52.219-9, entitled Small Business Subcontracting Plan, is included in solicitations and contracts that offer subcontracting possibilities and are expected to exceed $650,000 ($1.5 million for construction of any public facility). Subcontracting plans are not required from small businesses or for contracts or contract modifications that will be performed entirely outside of the United States and its outlying areas.

In accordance with FAR 19.704, entitled Subcontracting Plan Requirements, your subcontracting plan must include a delineated list of various statements, descriptions and assurances which are incorporated into the contract or subcontract. Among other things, this list includes:

  • Statements of separate percentage goals;
  • Total dollars planned; and
  • A description of the principal types of supplies and services to be subcontracted for using all small business and each small business subtitled-classification as subcontractors.

FAR Part 19 defines subcontract as any agreement (other than an employer-employee relationship) entered into by a government prime contractor or subcontractor calling for supplies and/or services required for the performance of the contract, contract modification or subcontract.

Your plan covers the entire contract period (including option periods), applies to a specific contract and has goals that are based on your planned subcontracting in support of the specific contract. The exception is that indirect costs incurred for common or joint purposes may be allocated on a prorated basis.

One of the required elements of your plan includes a description of the types of records that will be maintained concerning procedures adopted to comply with the requirements and goals in the plan. This includes records on each subcontract solicitation resulting in an award of more than $150,000. These records must address small business and each small business subtitled classification, indicating whether each was solicited and:

  • If not, why not?
  • If so, the reason the award was not made to a small business concern.

If you fail to comply in good faith with the requirements of your subcontracting plan, you are in material breach of your contract. Failure to make a good faith effort to comply with the requirements of the subcontracting plan will result in the imposition of liquidated damages.

When U.S. government oversight officials conduct Small Business Subcontracting Plan oversight, you must be able to produce adequate documentation to demonstrate compliance with the statements and assurances included in the plan.

Tips


Develop and implement procedures addressing pursuit of and awards/non-awards to small business and each small business subtitled classification for awards of more than $150,000.

Develop a checklist or other standard form depicting and/or capturing the reason(s) for not soliciting or awarding a subcontract for greater than $150,000 to other than small business. Acceptable rationale may include:

1. The selected source is the only known supplier that can furnish the supplies/services.

2. Of the potential suppliers solicited or considered, the selected supplier was chosen on the basis of:

  • Technical capability;
  • Fair and reasonable price;
  • Acceptable delivery schedule;
  • Low bid; or
  • Customer direction.

3. Supplies must be compatible with equipment previously furnished by this supplier.

4. Support services required are most reasonable and expeditiously obtained from the supplier who supplied the original equipment.

5. Subcontract options must be exercised.

6. Supplier support services are continuing.

7. No solicitation is made to small business or small disadvantaged business concerns for technical, quality, delivery or other justifiable reasons, or no known small business sources possessing the required capabilities.

If small business was solicited for a resultant award of more than $150,000, document your reason(s) for not awarding to the solicited small business. Acceptable rationale may include:

  • No quotation received;
  • Unsubstantiated proposal received;
  • Less technically qualified than the selected source;
  • Noncompetitive price;
  • Unacceptable delivery;
  • Financially unstable; and
  • Not qualified/acceptable.

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