Under current regulations, prime contractors who are required to develop small business subcontracting plans are able to take credit for awards only to first-tier small business subcontractors. As authorized by Section 1614 of the 2014 National Defense Authorization Act (“NDAA”), a proposed rule issued by the United States Small Business Association on Oct. 6, 2015, would amend the regulations to allow prime contractors to count all subcontracts to small businesses, at any tier, toward their small business subcontracting plan goals.
The change would apply to subcontracting plans that apply to one particular contract. It would not apply where a subcontracting plan applies to more than one contract or to a contract with more than one agency. In other words, if a firm has a subcontracting plan that covers more than one contract, there would be no change — only first-tier subcontractors would be counted toward satisfying the subcontracting goals.
The proposed rule would also require prime contractors to include the NAICS code and the corresponding size standard that “best describes the principal purpose of the subcontract” in the subcontract and to state what types of records the prime contractor will maintain to establish that it has adopted adequate procedures to ensure compliance with the requirements of its subcontracting plan.
The proposed rule states that the “benefits and costs of the proposed regulations are minimal” because contractors and covered subcontractors are already required to establish subcontracting plans and report on their achievements. The major difference would be that the prime would want to propose its own goals and incorporate those into first-tier subcontracting plans in a way that promotes contracting with small businesses at all tiers.
The proposed rule is available at 80 Fed. Reg. 60300, Oct. 6, 2015. Comments are requested and must be received on or before Dec. 7, 2015.