Government Contracts Proposed FAR Rule on Small Business Subcontracting Credit
Monday, July 22, 2019

Proposed FAR Rule on Small Business Subcontracting Credit

By Government Contracts Editorial Staff

The Department of Defense, General Services Administration, and National Aeronautics and Space Administration are proposing to amend the Federal Acquisition Regulation to to implement section 1614 of the Defense Authorization Act for Fiscal Year for FY 2014 (PL 113-66) and a Small Business Administration final rule (¶70,425.592) addressing credit for lower-tier small business subcontracting. Section 1614 requires prime contractors to receive small business subcontracting credit for subcontracts awarded by other than small business subcontractors; adds an assurance in subcontracting plans for approval and monitoring of subcontracting plans by the offeror and all subcontractors required to maintain subcontracting plans; and requires a written statement of the records the offeror will maintain to ensure compliance with the subcontracting plan at the lower tiers. In addition to implementing these statutory requirements, the SBA rule requires the prime to have two sets of goals in its individual subcontracting plan—one for direct subcontract awards and a second for subcontracts awarded at any tier by OTSB subcontractors with individual subcontracting plans. The rule also requires the prime’s performance under the individual subcontracting plan to be evaluated based on its combined performance under the first-tier and lower-tier goals. The FAR currently requires OTSBs with subcontracts valued over $700,000 ($1.5 million for construction) to have subcontracting plans and to report their subcontracting achievements in the Electronic Subcontracting Reporting System (FAR Subpart 19.7).

Monitoring Subcontractor Achievements. The rule would amend the FAR to use existing eSRS subcontracting reports as a way for prime contractors to monitor subcontractor achievements. Proposed changes to FAR 19.704 would group together basic requirements for all subcontracting plans, and special requirements for commercial plans, individual subcontracting plans, and master subcontracting plans. Text on subcontractor monitoring assurances and maintaining records, and revised definitions, would also be added to this section. A new paragraph (d), Special requirements for individual subcontracting plans, would address existing and new requirements specific to individual plans and the new requirements related to lower-tier goals. The rule proposes similar changes to the clause at FAR 52.219-9, Small Business Subcontracting Plan, and adds a new paragraph (e), which would apply only to individual subcontracting plans that require the inclusion of separate goals for subcontracting at lower tiers. This new paragraph also addresses the requirement to have lower-tier goals and provides information on receiving credit toward those goals. A new paragraph (m) would provide guidance to contractors regarding when and how to include the clause in subcontracts. Finally, the rule would make related changes to FAR 19.701, FAR 19.705-4, FAR 19.705-6, FAR 42.1501, FAR 42.1503, and the clause at FAR 52.212-5. Comments referencing FAR Case 2018-003 are due August 26, 2019. For the text of the proposed rule, see ¶70,006.338.

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