Government Contracts FAR Rule on Good Faith Compliance with Subcontracting Plans
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Tuesday, June 30, 2020

FAR Rule on Good Faith Compliance with Subcontracting Plans

By Government Contracts Editorial Staff

A proposed rule would amend the Federal Acquisition Regulation to address good faith compliance with small business subcontracting plans. The rule implements section 1821 of the National Defense Authorization Act for Fiscal Year 2017 (15 USC 637 note, PL 114-328), which required the Small Business Administration to amend its regulations to provide examples of activities that would be considered a failure to make a good faith effort to comply with an SBSP. SBA’s rule implementing section 1821 (¶70,425.641) amended SBA 125.3(d)(3) to provide guidance on evaluating whether the prime contractor made a good faith effort to comply with its SBSP and a list of examples of activities that reflect a failure to make a good faith effort. SBA also amended this section to require prime contractors with commercial subcontracting plans to include indirect costs in their subcontracting goals. SBSPs are required from large prime contractors when a contract is expected to exceed $700,000 ($1.5 million for construction) and has subcontracting possibilities.

Examples Added. The proposed rule would amend FAR 19.704, Subcontracting plan requirements, and the clause at FAR 52.219-9, Small Business Subcontracting Plan, to require, with certain exceptions, the inclusion of all indirect costs in commercial plans and summary subcontract reports. The rule would also reorganize and change the name of FAR 19.705-7 to “Compliance with the subcontracting plan.” Additional proposed changes to this section add examples of a good faith effort and of a failure to make a good faith effort to comply with the subcontracting plan. Finally, the rule would amend FAR 19.705-4, FAR 19.705-6, FAR 19.706, FAR 42.1501, FAR 52.212-5, and FAR 52.219-16 to add references to FAR 19.705-7. Comments on the rule referencing FAR Case 2019-004 are due August 3, 2020. See ¶70,006.354 for the text of the rule.

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