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New FAR for Low-Tier Small Business Subcontracting Credit

Comment 1

The Dept. of Defense (DoD), General Services Administration, (GSA) and the National Aeronautics and Space Administration (NASA) are proposing to revise the Federal Acquisition Regulation (FAR) to implement a section of the National Defense Authorization Act and regulatory changes made by the Small Business Administration in a  2016 final rule. The primary objective of the proposed rule is to open the door for small businesses interested in participating in Federal procurement as a subcontractor and implement statutory requirements to help achieve this.


The proposed amendments to the FAR will have the following effects:

  • "will provide that where a prime contractor has an individual subcontracting plan for a contract with a single executive agency, the prime contractor shall receive credit towards its subcontracting goals for awards made to small business concerns at any tier by subcontractors with individual subcontracting plans.

  • The rule provides new assurances for offerors to include in subcontracting plans. The new assurances relate to monitoring activities for contractors and subcontractors with regards to subcontracting plans.

  • The new rule will require the contractor to demonstrate procedures established to ensure subcontractors at all tiers comply with their subcontracting plans. SBA’s final rule requires a prime contractor with an individual subcontracting plan to receive subcontracting credit for subcontracts awarded to small business concerns at any tier by subcontractors with individual subcontracting plans.

  • The changes require the prime contractor to have two sets of goals in its individual subcontracting plan: one set of goals includes the prime contractor’s direct subcontract awards (i.e., the first-tier goals), while the second set of goals includes subcontracts awarded at any tier by other than small business subcontractors with individual subcontracting plans (i.e., lower-tier goals). The purpose of the lower-tier goals is to ensure maximum practicable opportunity for small business concerns at the prime contractor’s first tier, as well as at all lower tiers, in the performance of the contract. This requirement to have two sets of subcontracting goals applies only to the prime contractor’s individual subcontracting plan and does not apply to subcontractors’ subcontracting plans.

  • The prime contractor’s performance under the individual subcontracting plan must be evaluated based on its combined performance under the first-tier and lower-tier goals.

  • The FAR currently requires other than small businesses 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 (eSRS). DoD, GSA, and NASA propose to use these existing subcontracting reports in eSRS as a way for the prime contractor to monitor subcontractors’ achievements.

  • To minimize public burden, the Government intends to use Individual Subcontract Reports (ISRs) submitted in eSRS by subcontractors with individual subcontracting plans to calculate a prime contractor’s achievement for the lower-tier goals. Therefore, this proposed rule does not require any additional action by the prime contractor in eSRS to approve or acknowledge achievement for the lower-tier goals. If the lower-tier subcontractors do not submit ISRs in eSRS, this could impact the prime contractor’s achievement toward the lower-tier goals, which could impact the evaluation of the prime contractor’s performance rating when their combined performance is assessed under the first-tier and lower-tier subcontracting goals under FAR subpart 42.15, Contractor Performance Information. This imposes no new requirements or risks because the FAR currently requires an assessment of the prime contractor’s performance against, and efforts to achieve, the goals identified in the small business subcontracting plan when the contract includes the clause at 52.219-9 of the FAR.”

The DoD, GSA and NASA are presently inviting comments on the proposed FAR amendments.

Navigating the government contracting environment requires expertise. If you are interested in contracting with the government or wish to send your comments to the committee proposing these changes, Contact us today. Please call (303) 534-1958 or complete a contact form on our website.

About the AuthorMarc Tawil


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