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Small Business Subcontracting Plan vs. Participation Plan

  • Small Business
  • Subcontracting Plan
  • Participation Plan

babs2523

By babs2523 April 9, 2014 in Small Business, Socioeconomic Programs

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I am under the impression that most Dept. of Defense RFPs include a requirement for a Small Business Subcontracting Plan (SBSP) from Large Businesses (LBs) when the FAR 19.7 criteria are triggered. In addition, most also require a Small Business Participation Plan (SBPP) from both Large and Small Business Offerors which is different from the SBSP. From what I have seen, the SBPP usually requires the Offeror to calculate the percentage of participation on total contract value (sometimes the offeror's price and sometimes the contract's ceiling value), while the SBSP usually requires the SB percentage of participation to be calculated using the value of the "total subcontracted dollars." (I say "usually" because of the Court of Federal Claims decision in FIrstLine Transportation Security, Inc, v. US, No. 12-601C, November 27, 2012.)

Can anyone tell me if any other Agencies use these 2 separate plans? From what I have seen, other Agencies seem to use the terms "subcontracting" and "participation" interchangeably.

Thanks (I am new to this, so any insights or references are welcome.)

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napolik

The SBSP is a contract requirement; the SBPP appears to be an evaluation factor.

http://posts.same.org/sbconference/presentations/Robinson-Burnette_WedPresentation.pdf

  • 5 months later...

Fred

DoD and NASA seem to have the most formalized approach. Other agencies may utilze as in he case you reference. The plans are really not supposed to be different. Participation is an evaluation factor that is to roll into the sub plan. The TCV dollars of participatio become 100%of the dollare to be subcontracted to small.

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What Is the Difference Between a Small Business Participation Plan & a Small Business Subcontract?

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The Advantages of a Cost Plus Contract

The advantages of fixed price contracts, the advantages of a minority business status.

  • Disadvantaged Business Grants
  • What Is a Competitive Contract?

Many small businesses are finding lucrative opportunities by working on contracts with federal government agencies. One of these routes is through the Small Business Participation Plan, which allows a small business to take direct government contracts. The other option is the Small Business Subcontracting Plan, in which small businesses work as subcontractors for a larger prime contracting firm. Each program has different eligibility requirements, program goals and participation rules.

Program Goals

The primary difference between a Small Business Participation Plan contract and a Small Business Subcontract lies in its goals. Since the Small Business Participation Plan allows government agencies to contract directly with small businesses, the monetary goals are based on total value of a contract. The goals of a Small Business Subcontract are based on total dollars the prime contractor subcontracts out to the small-business operators. Negotiations between the government contracting officer and the contractor determine the goal amounts.

Program Benefits

In an effort to stimulate the participation of small businesses in government contracts, agencies must have a set percentage of each project's work attributed to small businesses. With the Small Business Participation Plan, small businesses benefit by establishing direct relationships with contracting officials and eliminating a larger prime contractor as an intermediary. The Small Business Subcontracting Plan opens up avenues for small businesses to take part in projects that may be too large for them to handle as a prime contractor.

Participation Factor

Small-business owners should examine any request for proposals from government agencies to determine if they can participate as a prime contractor and take part in the Small Business Participation Plan. One mistake that both small and large businesses make when examining the requests for proposals is that they list their small-business subcontracting goals, rather than determining if any opportunities for prime contracting are available. If a small business does participate as a prime contractor, it will have more control over the project.

Subcontracting Rules

The winning bidder on government contracts valued at over $500,000, or $1 million on construction projects, must include a subcontracting plan that sets aside percentage and dollar goals for subcontracts to small businesses. These include small businesses owned by women, veterans, service-disabled veterans, and those located in disadvantaged areas and Historically Underutilized Business Zones, also known as HUBZones. The contracting officer will review these agreements to ensure that small businesses will have the "maximum practicable opportunity" to participate before granting the contract.

  • U.S. Department of Army: What is the Difference between Small Business Participation Plan Goals and Small Business Subcontracting Plan Goals?
  • U.S. Department of Housing and Urban Development: Small Business Types and Programs

Living in Houston, Gerald Hanks has been a writer since 2008. He has contributed to several special-interest national publications. Before starting his writing career, Gerald was a web programmer and database developer for 12 years.

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Government Small Business Subcontracting Plan

Is your bid subcontracted out what is a small business participation plan.

The answer to these questions can make the difference in getting a high proposal evaluation score and a low one.

Government Small Business Subcontracting Plan FAR Small Business Participation Plan Requirements

A Small Business Participation Plan is the percentage (%) of work an Agency requires must be completed by a small business.  In other words, how much a small business must participate.  The reason for this is to involve small businesses in contracts and eliminate a Prime Contractor from being a “middle man.” Some agencies have chosen to name the requirement “small business participation plan” or ” small business utilization plans” since subcontracting plans were initially put in place for large businesses that compete in full and open bidding requirements.

What is a Small Business Subcontracting Plan?

 The biggest difference between the two is the reason for each.

A Small Business Participation Plan allows an Agency to contract directly with small businesses and sets a percentage goal based on a contracts total dollar value.  Whereas, a Small Business Subcontracting Plan sets a goal based on the amount of money a prime contractor subcontracts to small business subcontractors in order to allow small businesses to take on larger projects.

           Although it is true that a small business participation/utilization plan only sets forth goals, each prime contractor now has a legal obligation (through the expressed terms of the prime contract) to demonstrate a good faith effort to seek out qualified subcontractors in the various socio-economic categories ( service disabled veteran-owned ,  HUBZone ,  government contracting small business disadvantage plan requirements , Woman-owned, and Veteran-owned).

Some companies may argue that the prime contractor should not be held to a standard where the government’s requirements are only goals. This argument will not stand when courts look at what if anything is subcontracted.

Government Oversight of Small Business Subcontracting Plans — a Continuing Problem

  Oversight has been an ongoing problem throughout the United States. FAR 52.219-9 small business subcontracting plan requires government contracts awarded to over $650,000 (over $1.5 million for the construction of a public facility) to have a mandatory subcontracting plan included in the prime contract. However, companies submitting federal bids offer the minimum pass through work to small businesses.

  • After the government awards the contract, many federal agencies do not diligently follow up on the prime contractor’s compliance requirement.
  • Recently, large prime contractors have been scrutinized and given  show-cause  letters  for not complying with their subcontracting plans in good faith.

The Problem:  Large businesses that bid on full and open government contracts have no problem submitting plans. However, when the bid is awarded, most large prime contractors know that government agencies genuinely do not follow up or enforce the statutory requirements for subcontracting plans.

As stated in 15 USC 637 (d)(8), any contractor or subcontractor failing to comply in good faith with the requirements of the subcontracting plan is in material breach of its contract. Further, 15 USC 637 (d)(4)(F) directs that a contractor’s failure to make a good faith effort to comply with the requirements of the subcontracting plan shall result in the imposition of liquidated damages. It is clear that prime contractors have an affirmative responsibility to comply with laws.

Under FAR 19.705-2, the contracting officer must take individual actions to determine whether a proposed contract requires subcontracting plans.

Reporting Requirements 15 USC 637 and FAR 52.219

To amplify the legal obligation, primes have to submit reports to support their progress (SF 294 and 295) in addition to other reports showing their interaction with small businesses. Good faith must be present, or the prime contractor runs the risk of breaching the contract.

  • As stated in  15 USC 637 (d)(8) and FAR 19.7,  any contractor or subcontractor failing to comply in good faith with the requirements of the subcontracting plan is in material breach of its contract.
  • Further, 15 USC 637 directs that a contractor’s failure to make a good faith effort to comply with the requirements of the subcontracting plan shall result in the imposition of liquidated damages.

Is the named company not subcontracted?

Legal Rights for Government Small Business Subcontracting Plan Under FAR 19.7: Revisiting the lack of  privity of contract  excuse from government agencies, one has to ask what rights the small subcontractor has. Given the language of federal statutes and Federal Acquisition Regulations (FAR Part 19.7), it appears that subcontractors are third party beneficiaries to the terms of the prime contract.

  • Regulations for government small business subcontracting plans tend to give rise to the contracting officer’s legal obligation to enforce the terms of the contract.
  • More specifically, to ensure that large prime contractors do no just ‘blow off’ their responsibility to pass on work to small businesses.
  • Companies should realize that their compliance with a small business subcontracting plan is measured in future government bids.

For small businesses affected, having a  government contracts lawyer  t hat understands the underlying principles of subcontracting plans can be the difference between getting work or not.

Common Issues faced by Small Businesses with Subcontracts and Subcontracting Plans: Losing Bids

  The first hurdle is the burden of submission itself.  Government bids have increased the requirement to submit small business subcontracting plans under FAR 19.7 and FAR 52.219 or what is now supplemented with the small business participation plan requirements. Despite already being a small business, there is a huge concern as to why small businesses should still have to submit participation plans.

Why Even Have the Small Business Subcontracting Plan Rule FAR 52.219?

The short answer is that the RFP requirement is difficult to challenge in a pre-award bid protest. The remaining focus may be to challenge how the contracting agency actually evaluation your bid submission per the solicitation requirements.

Both GAO and the Court of Federal Claims are filled with cases where several companies have lost bids because there was no strategy or thought put into the response when the solicitation gave the minimum criteria for either a Small Business Participation Plan or Subcontracting Plan

  • Small Businesses sometimes do not quite understand how it benefits them as a prime contractor
  • Although the agency drafts its own contracting requirements, both contractors and federal contracting personnel still struggle to understand the unique difference between the two plans.
  • Separate from the Small Business Participation Plan, large businesses contractors must also submit a Plan (Individual Contract Plan) as required by FAR 52.219-9.

Understanding Subcontract Management in Government Contracting

As a practical matter, your responsibility for taking charge and managing your subcontractors start at the bidding stage. Allegations up front can cause the SBA or agency to dig deeper into the original subcontracted agreements and make adverse legal conclusions. Subcontract management in government contracting is an initial matter. However, it also continues through the performance stages of the contract.

Do you understand how the SBA’s similarly situated small business rules play into the subcontracting requirement?

The Subcontracting plan Program is based on  Public Law 95-507   that was passed in 1978 to ensure that large prime contractors further the goal of increasing participation of small businesses in federal procurement.

The reason is to ensure that some of the federal contracting dollars are passed down to small businesses that are service disabled veteran owned small business companies, SBA HUBZone, small disadvantaged requirements, Woman-owned small business, and Veteran-owned requirements.

Many solicitations now require contractors to submit the plans with their proposals. However, many bidders do not put enough emphasis on their plans. As a result, they receive a lower technical score. If the government states that it will evaluate your subcontracting plan, you want to make sure that you put as much emphasis on it just like any other solicitation evaluation requirements.

Small Business Subcontracting Plan Exemptions

Small business subcontracting plans are not required from subcontractors when the prime contract contains the clause at FAR 52.212–5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items, or when the subcontractor provides a commercial item subject to the clause at FAR 52.244–6, Subcontracts for Commercial Items, under a prime contract.

Other subcontracting plan exemptions include Small businesses Personal services contracts; Contract performed outside the US; Modifications that do not contain the clause at FAR 52.219-8, Utilization of Small Business Concerns.

Do You have to Respond Even Though You Are a Small Business?

The short answer is yes. When the government states in the solicitation that it wants to see more contracts subcontracted to small businesses, this is a very serious requirement. The government has the ability to state what it wants. However, if you see something that violates procurement law or develops valid challenges to the stated solicitation requirements, then you should seek help from legal counsel.

Federal agencies’ small business goals are based on congressional guidelines. The original intent was to put large businesses on notice that although there is no privity of contract between the government and your subcontractor, the terms and conditions of the prime contract would essentially get around the requirement.

A question arises as to whether your proposed subcontracting plan covers the entire contract period, option periods or in some way deficient. These are concerns that you should address during the initial bidding stage.

What if You Cannot Find Small Businesses to Perform the Work?

The reality is that not all prime contractors can find small businesses in the locale to perform work under the solicitation requirements. What do you do? One common suggestion would be to state the relevant reasons in your bid as to why you could not realistically submit a subcontracting plan that covers a specific group or groups. Just only saying that you will not be able to meet the requirement can potential penalize you in the evaluation scores.

As a bidder, you should focus on a few things.

  • First, seek out credible small businesses that can actually perform the work. Fighting the solicitation requirement has proven not to work in the courts.
  • Second, make sure that you do not fall short of the solicitation’s proposed goal requirements. If you fall short, the government may rate you lower (if subcontracting plans are part of the evaluation criteria.
  • Third, make sure that you identify the percentage of work and of the contract for each subcategory (e.g. SDVOSB,  HUBZone   etc.) and how much of the overall contract cost will be passed on to your small business subcontractors.

Be aware of the new SBA rules regarding  small business subcontracting and limitations .

Contracting Officer Enforcement Authority Under FAR 19.7 and 15 USC 637

The Contracting Officer has the statutory power to enforce small business participation plans under FAR 19.7 and 15 USC 637. If, after consideration of all the pertinent data, the contracting officer finds that the contractor failed to make a good faith effort to comply with its subcontracting plan, the contracting officer shall issue a final decision to the contractor to that effect and require the payment of liquidated damages in an amount stated.

SBA Responsibility for Small Business Participation Plans Under FAR

Does the SBA have authority and responsibility to participate in the oversight of your small business participation plans or small business subcontracting under FAR 52.219?  Of course, it does.  Under FAR Part 19.707. Although the rules state that the SBA “may” act, there should be an inclination to show that it will act. See information about  SBA 8a small business plan .

GAO Reports:  The Government Accounting Office  ( GAO ) has submitted  reports  addressing this very problem. In fact, it made stern recommendations to at least two agencies to implement more oversight into their government contract subcontracting goal plan obligations.

For immediate help with your small business subcontracting plans, please call us at 1-866-601-5518.

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Participation plans offer better way to include small businesses

Providing competitive opportunity

Understanding the difference between a Small Business Participation Plan and a Small Business Subcontracting Plan is important to ensure that small businesses get a competitive opportunity when bidding on government contracts. During a Small Business Lunch and Learn presentation Jan. 10, Jennifer Letson, the Subcontracting Program Manager for the Aviation and Missile Command’s Office of Small Business, reviewed the differences between the two plans with Army Contracting Command-Redstone employees. “There is a lot of confusion about these plans,” Letson said. “But, small businesses can benefit from contracts requiring a Small Business Participation Plan because it allows them to include their self-performance. It especially benefits them when they are competing for a contract as a prime contractor.” As government contracting officials work through the acquisition process on a new contract, they should keep in mind the importance of providing bidding opportunities to small businesses, she said. “Small businesses should not be an afterthought. They should be part of the process from the very beginning,” Letson said. “Requests for Proposals should be structured to allow small businesses to submit their own participation plans. The RFP shouldn’t ask small businesses to subcontract since small businesses are not required to submit small business subcontracting plans.” When a Request for Proposal asks small and large businesses to submit subcontracting goals, the request requires small businesses to serve as a subcontractor on the contract. But, small businesses can achieve goals through their own participation as a prime contractor, Letson said. A Subcontracting Plan requires information from the large business on how the small business will serve as a subcontractor and is based on total planned subcontracting dollars. A Participation Plan requires information from either the large or small business on how the small business will participate and is based on total contract value. “Assessment of a Subcontracting Plan and evaluation of a Participation Plan are two separate, yet related areas. They are treated differently in the solicitation, during source selection and in award,” Letson said. “The Subcontracting Plan is not submitted for the purpose of complying with a source selection evaluation criterion, but as a matter to be eligible to receive a contract award. Subcontracting Plans are not evaluated as part of the source selection, but reviewed for acceptability.” On the other hand, Participation Plans are part of the source selection evaluation, and are focused on determining the extent of which small businesses are specifically identified in proposals, extent of commitment to the small businesses, the extent of participation of small businesses in terms of total value, and the complexity and variety of work being performed. The most significant measurement of the differences between the two plans are in the determination of the contract dollar value reserved for small businesses, Letson said. With a Small Business Subcontracting Goal, a small business gets 20 percent of the dollars available for subcontracting. If a large business decides to subcontract $100,000 on a $1 million contract, then the small business will get 20 percent of the $100,000 in the contract available for subcontracting, or $20,000. With a Small Business Participation Goal, small businesses get 20 percent of the total value of the entire contract. If a large business proposes 20 percent small business participation on a $1 million contract, then small businesses receive 20 percent of $1 million, or $200,000 in subcontract work. “Large businesses and small businesses will utilize small businesses in the performance of government contracts,” Letson said. “Small businesses are the backbone of our country and how we operate. “We have Small Business Participation Plans to ensure contractors receiving a government award, whether large businesses or small businesses, will utilize small businesses in the performance of the contract; to encourage prime contractors to include small businesses in proposal development; and to ensure those small businesses are actually awarded subcontracts. We need to hold prime contractors accountable to what they say they are going to do in including small businesses on a contract.” For that reason, contracting officers should require the submission of a Small Business Participation Plan separate from a Subcontracting Plan in the proposal process, Letson said. The Participation Plan must clearly state the percentage goals for small business participation, and the breakdown of those goals for various small business socio-economic concerns, such as veteran owned and woman owned small businesses. In the evaluation of a Participation Plan, the complexity of the work set aside for small businesses is closely scrutinized. “Small businesses are very capable of performing complex work,” Letson said. “We want to ensure small businesses are given meaningful work. They are trying to build up their past performance so they can grow into a prime contractor. It’s important for the contractor to show the complexity and variety of work the small business is performing.” Other factors considered are whether small businesses are specifically identified in the proposal, the realism of the proposal and the past performance of complying with subcontracting requirements. If the prime contractor is a small business, they can include their own participation along with the participation of small business subcontractors in their proposal, Letson said. When the prime contractor is a large business, they must submit both a Small Business Participation Plan and Subcontracting Plan, and the two plans should be consistent. “Subcontracting plans should contain realistic, challenging and attainable goals for subcontracting with small businesses and small business socioeconomic categories,” Letson said. “Large businesses are not eligible for an award if they fail to submit an acceptable subcontracting plan.” There are more than 500 small businesses that are qualified to do business with AMCOM on aviation, missile and Garrison contracts, she said. For more information on Small Business Participation Plans and Subcontracting Plans, contact Letson in the AMCOM Office of Small Business Programs, 876-2230, [email protected] .

Subpart 19.7 - The Small Business Subcontracting Program

19.701 definitions..

As used in this subpart-

Alaska Native Corporation (ANC) means any Regional Corporation, Village Corporation, Urban Corporation, or Group Corporation organized under the laws of the State of Alaska in accordance with the Alaska Native Claims Settlement Act, as amended ( 43 U.S.C. 1601 , et seq .) and which is considered a minority and economically disadvantaged concern under the criteria at 43 U.S.C. 1626(e)(1) . This definition also includes ANC direct and indirect subsidiary corporations, joint ventures, and partnerships that meet the requirements of 43 U.S.C. 1626(e)(2) .

Commercial plan means a subcontracting plan (including goals) that covers the offeror’s fiscal year and that applies to the entire production of commercial products and performance of commercial services sold by either the entire company or a portion thereof ( e.g., division, plant, or product line).

Electronic Subcontracting Reporting System (eSRS) means the Governmentwide, electronic, web-based system for small business subcontracting program reporting.

Failure to make a good faith effort to comply with the subcontracting plan means willful or intentional failure to perform in accordance with the requirements of the subcontracting plan, or willful or intentional action to frustrate the plan.

Indian tribe means any Indian tribe, band, group, pueblo, or community, including native villages and native groups (including corporations organized by Kenai, Juneau, Sitka, and Kodiak) as defined in the Alaska Native Claims Settlement Act ( 43 U.S.C.A. 1601 et seq .), that is recognized by the Federal Government as eligible for services from the Bureau of Indian Affairs in accordance with 25 U.S.C. 1452(c) . This definition also includes Indian-owned economic enterprises that meet the requirements of 25U. S.C. 1452(e) .

Individual subcontracting plan means a subcontracting plan that covers the entire contract period (including option periods), applies to a specific contract, and has goals that are based on the offeror’s planned subcontracting in support of the specific contract, except that indirect costs incurred for common or joint purposes may be allocated on a prorated basis to the contract.

Master subcontracting plan means a subcontracting plan that contains all the required elements of an individual subcontracting plan, except goals, and may be incorporated into individual subcontracting plans, provided the master subcontracting plan has been approved.

Reduced Payment means a payment that is for less than the amount agreed upon in a subcontract in accordance with its terms and conditions, for supplies and services for which the Government has paid the prime contractor.

Subcontract means any agreement (other than one involving an employer-employee relationship) entered into by a Government prime contractor or subcontractor calling for supplies and/or services required for performance of the contract, contract modification, or subcontract.

Total contract dollars means the final anticipated dollar value, including the dollar value of all options.

Untimely Payment means a payment to a subcontractor that is more than 90 days past due under the terms and conditions of a subcontract for supplies and services for which the Government has paid the prime contractor.

19.702 Statutory requirements.

Any contractor receiving a contract with a value greater than the simplified acquisition threshold must agree in the contract that small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns will have the maximum practicable opportunity to participate in contract performance consistent with its efficient performance. It is further the policy of the United States that its prime contractors establish procedures to ensure the timely payment of amounts due pursuant to the terms of their subcontracts with small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns.

(1) Except as stated in paragraph (b) of this section, section 8(d) of the Small Business Act ( 15 U.S.C. 637( d)) imposes the following requirements regarding subcontracting with small businesses and small business subcontracting plans:

(i) In negotiated acquisitions, each solicitation of offers to perform a contract that is expected to exceed $750,000 ($1.5 million for construction) and that has subcontracting possibilities, shall require the apparently successful offeror to submit an acceptable subcontracting plan. If the apparently successful offeror fails to negotiate a subcontracting plan acceptable to the contracting officer within the time limit prescribed by the contracting officer, the offeror will be ineligible for award. For a multiple-award contract with more than one North American Industry Classification System (NAICS) code, see paragraph (a)(2)(i) of this section.

(ii) In sealed bidding acquisitions, each invitation for bids to perform a contract that is expected to exceed $750,000 ($1.5 million for construction) and that has subcontracting possibilities, shall require the bidder selected for award to submit a subcontracting plan. If the selected bidder fails to submit a plan within the time limit prescribed by the contracting officer, the bidder will be ineligible for award. For a multiple-award contract with more than one NAICS code, see paragraph (a)(2)(i) of this section.

(iii) Each contract modification that causes the value of a contract without a subcontracting plan to exceed $750,000 ($1.5 million for construction), shall require the contractor to submit a subcontracting plan for the contract, if the contracting officer determines that subcontracting opportunities exist. For a multiple-award contract with more than one NAICS code, see paragraph (a)(2)(ii) of this section.

(i) For a multiple-award contract with more than one NAICS code, the solicitation referenced in paragraphs (a)(1)(i) and (ii) of this section shall require the apparently successful offeror to submit an acceptable subcontracting plan for either the distinct portion(s) or category(ies) of their proposal for which the offeror is other than small or for the entirety of their proposal, at the offeror's discretion. When determining the need for a subcontracting plan, the contracting officer shall consider the cumulative dollar value of the portion(s) or category(ies) of the offeror's proposal for which the offeror is other than small.

(ii) For a multiple-award contract with more than one NAICS code, the modification referenced in paragraph (a)(1)(iii) of this section shall require the contractor to submit an acceptable subcontracting plan for either the distinct portion(s) or category(ies) of the contract for which the contractor is other than small or for the entirety of their contract, at the contractor's discretion. When determining the need for a subcontracting plan, the contracting officer shall consider the cumulative dollar value of the portion(s) or category(ies) of the contract for which the contractor is other than small.

(b) Subcontracting plans (see paragraphs (a)(1) and (2) of this section) are not required–

(1) From small business concerns;

(2) For personal services contracts;

(3) For contracts or contract modifications that will be performed entirely outside of the United States and its outlying areas; or

(4) For modifications that are within the scope of the contract and the contract does not contain the clause at 52.219-8 , Utilization of Small Business Concerns.

(c) As stated in 15 U.S.C. 637(d)(9) , any contractor or subcontractor failing to comply in good faith with the requirements of the subcontracting plan is in material breach of its contract. Further, 15 U.S.C. 637(d)(4)(F) directs that a contractor’s failure to make a good faith effort to comply with the requirements of the subcontracting plan shall result in the imposition of liquidated damages.

(d) As authorized by 15 U.S.C. 637(d)(12) , certain costs incurred by a mentor firm in providing developmental assistance to a protégé firm under the Department of Defense Pilot Mentor-Protégé Program, may be credited as if they were subcontract awards to a protégé firm for the purpose of determining whether the mentor firm attains the applicable goals under any subcontracting plan entered into with any executive agency. However, the mentor-protégé agreement must have been approved by the Director, Small Business Programs of the cognizant DoD military department or defense agency, before developmental assistance costs may be credited against subcontract goals. A list of approved agreements may be obtained at https://business.defense.gov/Programs/Mentor-Protege-Program/.

19.703 Eligibility requirements for participating in the program.

(a) Except as provided in paragraph (c) of this section, to be eligible as a subcontractor under the program, a concern must represent itself as a small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, or women-owned small business concern.

(1) To represent itself as a small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, or women-owned small business concern, a concern must meet the appropriate definition (see 2.101 and 19.001 ). For subcontracting purposes, a concern is small if it does not exceed the size standard for the NAICS code that the prime contractor determines best describes the product or service being acquired by the subcontract.

(i) The prime contractor may accept a subcontractor's written representations of its size and socioeconomic status as a small business, small disadvantaged business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, or a women-owned small business, if the subcontractor represents that the size and socioeconomic status representation with its offer are current, accurate, and complete as of the date of the offer for the subcontracts; or

(ii) The prime contractor may accept a subcontractor's representation of its size and socioeconomic status as a small business, small disadvantaged business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, or a women-owned small business in the System for Award Management (SAM) if–

(A) The subcontractor is registered in SAM; and

(B) The subcontractor represents that the size and socioeconomic status representations made in SAM are current, accurate and complete as of the date of the offer for the subcontract.

(iii) The prime contractor may not require the use of SAM for the purposes of representing size or socioeconomic status in connection with a subcontract.

(iv) In accordance with 13 CFR 121.411, 126.900, 127.700, and 128.600, a prime contractor acting in good faith is not liable for misrepresentations made by its subcontractors regarding the subcontractor's size or socioeconomic status.

(b) The contractor, the contracting officer, or any other interested party can challenge a subcontractor's size status representation by filing a protest, in accordance with 13 CFR 121.1001 through 121.1008.

(1) In accordance with 43 U.S.C. 1626 , the following procedures apply:

(i) Subcontracts awarded to an ANC or Indian tribe shall be counted towards the subcontracting goals for small business and small disadvantaged business (SDB) concerns, regardless of the size or Small Business Administration certification status of the ANC or Indian tribe.

(ii) Where one or more subcontractors are in the subcontract tier between the prime contractor and the ANC or Indian tribe, the ANC or Indian tribe shall designate the appropriate contractor(s) to count the subcontract towards its small business and small disadvantaged business subcontracting goals.

(A) In most cases, the appropriate contractor is the contractor that awarded the subcontract to the ANC or Indian tribe.

(B) If the ANC or Indian tribe designates more than one contractor to count the subcontract toward its goals, the ANC or Indian tribe shall designate only a portion of the total subcontract award to each contractor. The sum of the amounts designated to various contractors cannot exceed the total value of the subcontract.

(C) The ANC or Indian tribe shall give a copy of the written designation to the contracting officer, the prime contractor, and the subcontractors in between the prime contractor and the ANC or Indian tribe within 30 days of the date of the subcontract award.

(D) If the contracting officer does not receive a copy of the ANC's or the Indian tribe’s written designation within 30 days of the subcontract award, the contractor that awarded the subcontract to the ANC or Indian tribe will be considered the designated contractor.

(2) A contractor acting in good faith may rely on the written representation of an ANC or an Indian tribe as to the status of the ANC or Indian tribe unless an interested party challenges its status or the contracting officer has independent reason to question its status. In the event of a challenge of a representation of an ANC or Indian tribe, the interested parties shall follow the procedures at 26.103 (b) through (e).

(d) Protests challenging the socioeconomic status of a HUBZone small business concern must be filed in accordance with 13 CFR 126.801 .

19.704 Subcontracting plan requirements.

(a) Each subcontracting plan required under 19.301-2 (e) and 19.702 (a)(1)(i), (ii), and (iii) shall include-

(1) Separate percentage goals for using small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes) and women-owned small business concerns as subcontractors;

(2) A statement of the total dollars planned to be subcontracted and a statement of the total dollars planned to be subcontracted to small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes) and women-owned small business concerns, as a percentage of total subcontract dollars. For individual subcontracting plans only, a contracting officer may require the goals referenced in paragraph (a)(1) of this section to be calculated as a percentage of total contract dollars, in addition to the goals established as a percentage of total subcontract dollars;

(3) A description of the principal types of supplies and services to be subcontracted and an identification of types of supplies or services planned for subcontracting to small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes), and women-owned small business concerns;

(4) A description of the method used to develop the subcontracting goals;

(5) A description of the method used to identify potential sources for solicitation purposes;

(6) A statement as to whether or not the offeror included indirect costs in establishing subcontracting goals (for commercial plans, see paragraph (d) of this section), and a description of the method used to determine the proportionate share of indirect costs to be incurred with small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes), and women-owned small business concerns;

(7) The name of an individual employed by the offeror who will administer the offeror’s subcontracting program, and a description of the duties of the individual;

(8) A description of the efforts the offeror will make to ensure that small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns have an equitable opportunity to compete for subcontracts;

(9) Assurances that the offeror will include the clause at 52.219-8 , Utilization of Small Business Concerns (see 19.708 (a)), in all subcontracts that offer further subcontracting opportunities, and that the offeror will require all subcontractors (except small business concerns) that receive subcontracts in excess of $750,000 ($1.5 million for construction) to adopt a plan that complies with the requirements of the clause at 52.219-9 , Small Business Subcontracting Plan (see 19.708 (b));

(10) Assurances that the offeror will-

(i) Cooperate in any studies or surveys as may be required;

(ii) Submit periodic reports so that the Government can determine the extent of compliance by the offeror with the subcontracting plan;

(iii) After November 30, 2017, include subcontracting data for each order when reporting subcontracting achievements for indefinite-delivery, indefinite-quantity contracts with individual subcontracting plans where the contract is intended for use by multiple agencies;

(iv) Submit the Individual Subcontract Report (ISR), and the Summary Subcontract Report (SSR) using the Electronic Subcontracting Reporting System (eSRS) ( http://www.esrs.gov ), following the instructions in the eSRS.

(A) The ISR shall be submitted semi-annually during contract performance for the periods ending March 31 and September 30. A report is also required for each contract within 30 days of contract completion. Reports are due 30 days after the close of each reporting period, unless otherwise directed by the contracting officer. Reports are required when due, regardless of whether there has been any subcontracting activity since the inception of the contract or the previous reporting period. When a contracting officer rejects an ISR, the contractor is required to submit a revised ISR within 30 days of receiving the notice of the ISR rejection.

(B) The SSR shall be submitted annually by October 30 for the twelve-month period ending September 30. When an SSR is rejected, the contractor is required to submit a revised SSR within 30 days of receiving the notice of SSR rejection;

(v) Ensure that its subcontractors with subcontracting plans agree to submit the ISR and/or the SSR using the eSRS;

(vi) Provide its prime contract number, its unique entity identifier, and the e-mail address of the offeror’s official responsible for acknowledging receipt of or rejecting the ISRs to all first-tier subcontractors with subcontracting plans so they can enter this information into the eSRS when submitting their ISRs; and

(vii) Require that each subcontractor with a subcontracting plan provide the prime contract number, its own unique entity identifier, and the e-mail address of the subcontractor’s official responsible for acknowledging receipt of or rejecting the ISRs, to its subcontractors with subcontracting plans;

(11) A description of the types of records that will be maintained concerning procedures adopted to comply with the requirements and goals in the plan, including establishing source lists; and a description of the offeror’s efforts to locate small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns and to award subcontracts to them;

(12) Assurances that the offeror will make a good faith effort to acquire articles, equipment, supplies, services, or materials, or obtain the performance of construction work from the small business concerns that the offeror used in preparing the bid or proposal, in the same or greater scope, amount, and quality used in preparing and submitting the bid or proposal. Responding to a request for a quote does not constitute use in preparing a bid or proposal. An offeror used a small business concern in preparing the bid or proposal if–

(i) The offeror identifies the small business concern as a subcontractor in the bid or proposal or associated small business subcontracting plan, to furnish certain supplies or perform a portion of the contract; or

(ii) The offeror used the small business concern's pricing or cost information or technical expertise in preparing the bid or proposal, where there is written evidence of an intent or understanding that the small business concern will be awarded a subcontract for the related work if the offeror is awarded the contract;

(13) Assurances that the contractor will provide the contracting officer with a written explanation if the contractor fails to acquire articles, equipment, supplies, services or materials or obtain the performance of construction work as described in (a)(12) of this section. This written explanation will be submitted to the contracting officer within 30 days of contract completion;

(14) Assurances that the contractor will not prohibit a subcontractor from discussing with the contracting officer any material matter pertaining to payment to or utilization of a subcontractor; and

(15) Assurances that the offeror will pay its small business subcontractors on time and in accordance with the terms and conditions of the subcontract, and notify the contracting officer if the offeror pays a reduced or an untimely payment to a small business subcontractor (see 52.242-5 ).

(b) Contractors may establish, on a plant or division-wide basis, a master plan (see 19.701 ) that contains all the elements required by the clause at 52.219-9 , Small Business Subcontracting Plan, except goals. Master plans shall be effective for a 3-year period after approval by the contracting officer; however, it is incumbent upon contractors to maintain and update master plans. Changes required to update master plans are not effective until approved by the contracting officer. A master plan, when incorporated in an individual plan, shall apply to that contract throughout the life of the contract.

(c) For multiyear contracts or contracts containing options, the cumulative value of the basic contract and all options is considered in determining whether a subcontracting plan is necessary. If a subcontracting plan is necessary and the offeror is submitting an individual subcontracting plan, the individual subcontracting plan shall contain all the elements required by paragraph (a) of this section and shall contain separate statements and goals based on total subcontract dollars for the basic contract and for each option.

(d) A commercial plan (as defined in 19.701 ) is the preferred type of subcontracting plan for contractors furnishing commercial products and commercial services. The subcontracting goals established for a commercial plan shall include all indirect costs with the exception of those such as the following: Employee salaries and benefits; payments for petty cash; depreciation; interest; income taxes; property taxes; lease payments; bank fees; fines, claims, and dues; original equipment manufacturer relationships during warranty periods (negotiated up front with the product); utilities and other services purchased from a municipality or an entity solely authorized by the municipality to provide those services in a particular geographical region; and philanthropic contributions. Once a contractor's commercial plan has been approved, the Government shall not require another subcontracting plan from the same contractor while the plan remains in effect, as long as the product or service being provided by the contractor continues to meet the definition of a commercial product or commercial service. The contractor shall—

(1) Submit the commercial plan to either the first contracting officer awarding a contract subject to the plan during the contractor’s fiscal year, or, if the contractor has ongoing contracts with commercial plans, to the contracting officer responsible for the contract with the latest completion date. The contracting officer shall negotiate the commercial plan for the Government. The approved commercial plan shall remain in effect during the contractor’s fiscal year for all Government contracts in effect during that period;

(2) Submit a new commercial plan, 30 working days before the end of the Contractor’s fiscal year, to the contracting officer responsible for the uncompleted Government contract with the latest completion date. The contractor must provide to each contracting officer responsible for an ongoing contract subject to the plan, the identity of the contracting officer that will be negotiating the new plan;

(3) When the new commercial plan is approved, provide a copy of the approved plan to each contracting officer responsible for an ongoing contract that is subject to the plan; and

(4) Comply with the reporting requirements stated in paragraph (a)(10) of this section by submitting one SSR that includes all indirect costs, except as described in paragraph (d) of this section, in eSRS, for all contracts covered by its commercial plan. This report will be acknowledged or rejected in eSRS by the contracting officer who approved the plan. The report shall be submitted within 30 days after the end of the Government’s fiscal year.

19.705 Responsibilities of the contracting officer under the subcontracting assistance program.

19.705-1 general..

(a) The contracting officer may encourage the development of increased subcontracting opportunities in negotiated acquisition by providing monetary incentives such as payments based on actual subcontracting achievement or award-fee contracting (see the clause at 52.219-10 , Incentive Subcontracting Program, and 19.708 (c)). When using any contractual incentive provision based upon rewarding the contractor monetarily for exceeding goals in the subcontracting plan, the contracting officer must ensure that (a) the goals are realistic and (b) any rewards for exceeding the goals are commensurate with the efforts the contractor would not have otherwise expended. Incentive provisions should normally be negotiated after reaching final agreement with the contractor on the subcontracting plan.

(1) Except where a contractor has a commercial plan, the contracting officer shall require a subcontracting plan for each indefinite-delivery, indefinite-quantity contract (including task or delivery order contracts, FSS, GWACs, and MACs), when the estimated value of the contract meets the subcontracting plan thresholds at 19.702 (a) and small business subcontracting opportunities exist.

(2) Contracting officers placing orders may establish small business subcontracting goals for each order. Establishing goals shall not be in the form of a new subcontracting plan as a contract may not have more than one plan ( 19.705-2 (e)).

19.705-2 Determining the need for a subcontracting plan.

The contracting officer shall take the following actions to determine whether a proposed contractual action requires a subcontracting plan:

(1) Determine whether the proposed total contract dollars will exceed the subcontracting plan threshold in 19.702 (a).

(2) Determine whether a proposed modification will cause the total contract dollars to exceed the subcontracting plan threshold (see 19.702 (a)).

(b) Determine whether subcontracting possibilities exist by considering relevant factors such as-

(1) Whether firms engaged in the business of furnishing the types of items to be acquired customarily contract for performance of part of the work or maintain sufficient in-house capability to perform the work; and

(2) Whether there are likely to be product prequalification requirements.

(3) Whether the firm can acquire any portion of the work with minimal or no disruption to performance (with consideration given to the time remaining until contract completion), and at fair market value, when a determination is made in accordance with paragraph (a)(2).

(c) If it is determined that there are no subcontracting possibilities, the determination shall include a detailed rationale, be approved at a level above the contracting officer, and placed in the contract file.

(d) In solicitations for negotiated acquisitions, the contracting officer may require the submission of subcontracting plans with initial offers, or at any other time prior to award. In determining when subcontracting plans should be required, as well as when and with whom plans should be negotiated, the contracting officer must consider the integrity of the competitive process, the goal of affording maximum practicable opportunity for small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns to participate, and the burden placed on offerors.

(e) A contract may not have more than one subcontracting plan. However, a contracting officer may establish separate subcontracting goals for each order under an indefinite-delivery, indefinite-quantity contract ( 19.705-1 (b)(2)). When a contract modification exceeds the subcontracting plan threshold (see 19.702 (a)) or an option is exercised, the goals of an existing subcontracting plan shall be amended to reflect any new subcontracting opportunities not envisioned at the time of contract award. These goal changes do not apply retroactively.

(f) If a subcontracting plan has been added to the contract due to a modification (see 19.702 (a)(1)(iii)) or a size re-representation (see 19.301-2 (e)), the subcontracting goals apply from the date of incorporation of the subcontracting plan into the contract and the contractor's achievements must be reported on the ISR (or the SF-294, if applicable) on a cumulative basis from the date of incorporation of the subcontracting plan into the contract.

19.705-3 Preparing the solicitation.

The contracting officer shall provide the Small Business Administration's (SBA’s) procurement center representative (or, if a procurement center representative is not assigned, see 19.402 (a)) a reasonable period of time to review any solicitation requiring submission of a subcontracting plan and to submit advisory findings before the solicitation is issued.

19.705-4 Reviewing the subcontracting plan.

The contracting officer shall review the subcontracting plan for adequacy, ensuring that the required information, goals, and assurances are included (see 19.704 ).

(a) No detailed standards apply to every subcontracting plan. Instead, the contracting officer shall consider each plan in terms of the circumstances of the particular acquisition, including-

(1) Previous involvement of small business concerns as prime contractors or subcontractors in similar acquisitions;

(2) Proven methods of involving small business concerns as subcontractors in similar acquisitions; and

(3) The relative success of methods the contractor intends to use to meet the goals and requirements of the plan, as evidenced by records maintained by contractors.

(b) If, under a sealed bid solicitation, a bidder submits a plan that does not cover each of the 15 required elements (see 19.704 ), the contracting officer shall advise the bidder of the deficiency and request submission of a revised plan by a specific date. If the bidder does not submit a plan that incorporates the required elements within the time allotted, the bidder shall be ineligible for award. If the plan, although responsive, evidences the bidder’s intention not to comply with its obligations under the clause at 52.219-8 , Utilization of Small Business Concerns, the contracting officer may find the bidder nonresponsible.

(c) In negotiated acquisitions, the contracting officer shall determine whether the plan is acceptable based on the negotiation of each of the 15 elements of the plan (see 19.704 ). Subcontracting goals should be set at a level that the parties reasonably expect can result from the offeror expending good faith efforts to use small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business subcontractors to the maximum practicable extent. The contracting officer shall take particular care to ensure that the offeror has not submitted unreasonably low goals to minimize exposure to liquidated damages and to avoid the administrative burden of substantiating good faith efforts. Additionally, particular attention should be paid to the identification of steps that, if taken, would be considered a good faith effort (see 19.705-7 ). No goal should be negotiated upward if it is apparent that a higher goal will significantly increase the Government’s cost or seriously impede the attainment of acquisition objectives. An incentive subcontracting clause (see 52.219-10 , Incentive Subcontracting Program), may be used when additional and unique contract effort, such as providing technical assistance, could significantly increase subcontract awards to small business, small disadvantaged business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, or women-owned small business concerns.

(d) In determining the acceptability of a proposed subcontracting plan, the contracting officer should take the following actions:

(1) Obtain information available from the cognizant contract administration office, as provided for in 19.706 (a), and evaluate the offeror’s past performance in awarding subcontracts for the same or similar products or services to small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns. If information is not available on a specific type of product or service, evaluate the offeror’s overall past performance and consider the performance of other contractors on similar efforts.

(2) In accordance with 15 U.S.C.637(d)(4)(F)(iii) , ensure that the goals offered are attainable in relation to-

(i) The subcontracting opportunities available to the contractor, commensurate with the efficient and economical performance of the contract;

(ii) The pool of eligible subcontractors available to fulfill the subcontracting opportunities; and

(iii) The actual performance of such contractor in fulfilling the subcontracting goals specified in prior plans.

(3) Ensure that the subcontracting goals are consistent with the offeror’s certified cost or pricing data or data other than certified cost or pricing data.

(4) Evaluate the offeror’s make-or-buy policy or program to ensure that it does not conflict with the offeror’s proposed subcontracting plan and is in the Government’s interest. If the contract involves products or services that are particularly specialized or not generally available in the commercial market, consider the offeror’s current capacity to perform the work and the possibility of reduced subcontracting opportunities.

(5) Evaluate subcontracting potential, considering the offeror’s make-or-buy policies or programs, the nature of the supplies or services to be subcontracted, the known availability of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns in the geographical area where the work will be performed, and the potential contractor’s long-standing contractual relationship with its suppliers.

(6) Advise the offeror of available sources of information on potential small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business subcontractors, as well as any specific concerns known to be potential subcontractors. If the offeror’s proposed goals are questionable, the contracting officer must emphasize that the information should be used to develop realistic and acceptable goals.

(7) Obtain advice and recommendations from the SBA procurement center representative (or, if a procurement center representative is not assigned, see 19.402 (a)) and the agency small business specialist.

19.705-5 Awards involving subcontracting plans.

(a) In making an award that requires a subcontracting plan, the contracting officer shall be responsible for the following:

(1) Consider the contractor’s compliance with the subcontracting plans submitted on previous contracts as a factor in determining contractor responsibility.

(2) Assure that a subcontracting plan was submitted when required.

(3) Notify the SBA procurement center representative (or, if a procurement center representative is not assigned, see 19.402 (a)) of the opportunity to review the proposed contract (including the plan and supporting documentation). The notice shall be issued in sufficient time to provide the representative a reasonable time to review the material and submit advisory recommendations to the contracting officer. Failure of the representative to respond in a reasonable period of time shall not delay contract award.

(4) Determine any fee that may be payable if an incentive is used in conjunction with the subcontracting plan.

(5) Ensure that an acceptable plan is incorporated into and made a material part of the contract.

(b) Letter contracts and similar undefinitized instruments, which would otherwise meet the requirements of 19.702 (a)(1)(i) and (ii), shall contain at least a preliminary basic plan addressing the requirements of 19.704 and in such cases require the negotiation of the final plan within 90 days after award or before definitization, whichever occurs first.

19.705-6 Postaward responsibilities of the contracting officer.

After a contract or contract modification containing a subcontracting plan is awarded or an existing subcontracting plan is amended, the contracting officer shall do the following:

(a) Notify the SBA of the award by sending a copy of the award document to the Area Director, Office of Government Contracting, in the SBA area office where the contract will be performed.

(b) Forward a copy of each commercial plan and any associated approvals to the Area Director, Office of Government Contracting, in the SBA area office where the contractor’s headquarters is located.

(c) Give to the SBA procurement center representative (or, if a procurement center representative is not assigned, see 19.402 (a)) a copy of-

(1) Any subcontracting plan submitted in response to a sealed bid solicitation; and

(2) The final negotiated subcontracting plan that was incorporated into a negotiated contract or contract modification.

(d) Notify the SBA procurement center representative (or, if a procurement center representative is not assigned, see 19.402 (a)) of the opportunity to review subcontracting plans in connection with contract modifications.

(e) Forward a copy of each plan, or a determination that there is no requirement for a subcontracting plan, to the cognizant contract administration office.

(f) Monitor the prime contractor's compliance with its subcontracting plan, to include the following:

(1) Ensure that subcontracting reports are submitted into the eSRS within 30 days after the report ending date ( e.g. , by October 30 th for the fiscal year ended September 30 th).

(2) Review ISRs, and where applicable, SSRs, in eSRS within 60 days of the report ending date ( e.g. , by November 30 th for a report submitted for the fiscal year ended September 30 th).

(3) Either acknowledge receipt of or reject the reports in accordance with subpart  19.7 , 52.219-9 , Small Business Subcontracting Plan, and the eSRS instructions ( www.esrs.gov ).

(i) The authority to acknowledge or reject SSRs for commercial plans resides with the contracting officer who approved the commercial plan.

(ii) If a report is rejected, the contracting officer must provide an explanation for the rejection to allow the prime contractor the opportunity to respond specifically to identified deficiencies.

(g) Evaluate the prime contractor's compliance with its subcontracting plan, to include the following:

(1) Assess whether the prime contractor made a good faith effort to comply with its small business subcontracting plan. See 19.705-7 (b) for more information on the determination of good faith effort.

(2) Assess the prime contractor's written explanation concerning the prime contractor's failure to use a small business concern in the performance of the contract in the same scope, amount, and quality used in preparing and submitting the bid or proposal, if applicable.

(h) Initiate action to assess liquidated damages in accordance with 19.705-7 upon a recommendation by the administrative contracting officer, if one is assigned, or receipt of other reliable evidence to indicate that assessing liquidated damages is warranted.

(i) Take action to enforce the terms of the contract upon receipt of a notice from the contract administration office under 19.706 (f).

(j) Acknowledge receipt of or reject the ISR and the SSR in the eSRS. Acknowledging receipt does not mean acceptance or approval of the report. The report shall be rejected if it is not adequately completed, for instance, if there are errors, omissions, or incomplete data. Failure to meet the goals of the subcontracting plan is not a valid reason for rejecting the report.

19.705-7 Compliance with the subcontracting plan.

(a) General. Maximum practicable utilization of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns as subcontractors in Government contracts is a matter of national interest with both social and economic benefits. When a contractor fails to make a good faith effort to comply with a subcontracting plan, these objectives are not achieved, and 15 U.S.C.637(d)(4)(F) directs that liquidated damages shall be paid by the contractor.

(b) Determination of good faith effort.

(1) In determining whether a contractor failed to make a good faith effort to comply with its subcontracting plan, a contracting officer must look to the totality of the contractor's actions, consistent with the information and assurances provided in its plan. The fact that the contractor failed to meet its subcontracting goals does not, in and of itself, constitute a failure to make a good faith effort (see 19.701 ). For example, notwithstanding a contractor's diligent effort to identify and solicit offers from any of the small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns, factors such as unavailability of anticipated sources or unreasonable prices may frustrate achievement of the contractor's subcontracting goals. The contracting officer may consider any of the following, though not all inclusive, to be indicators of a good faith effort:

(i) Breaking out work to be subcontracted into economically feasible units, as appropriate, to facilitate small business participation.

(ii) Conducting market research to identify potential small business subcontractors through all reasonable means, such as searching SAM, posting notices or solicitations on SBA's SUBNet, participating in business matchmaking events, and attending preproposal conferences.

(iii) Soliciting small business concerns as early in the acquisition process as practicable to allow them sufficient time to submit a timely offer for the subcontract.

(iv) Providing interested small businesses with adequate and timely information about plans, specifications, and requirements for performance of the prime contract to assist them in submitting a timely offer for the subcontract.

(v) Negotiating in good faith with interested small businesses.

(vi) Directing small businesses that need additional assistance to SBA.

(vii) Assisting interested small businesses in obtaining bonding, lines of credit, required insurance, necessary equipment, supplies, materials, or services.

(viii) Utilizing the available services of small business associations; local, state, and Federal small business assistance offices; and other organizations.

(ix) Participating in a formal mentor-protégé program with one or more small business protégés that results in developmental assistance to the protégés.

(x) Although failing to meet the subcontracting goal in one socioeconomic category, exceeding the goal by an equal or greater amount in one or more of the other categories.

(xi) Fulfilling all of the requirements of the subcontracting plan.

(2) When considered in the context of the contractor's total effort in accordance with its plan, the contracting officer may consider any of the following, though not all inclusive, to be indicators of a failure to make a good faith effort:

(i) Failure to attempt through market research to identify, contact, solicit, or consider for contract award small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, or women-owned small business concerns, through all reasonable means including outreach, industry days, or the use of Federal systems such as SBA's Dynamic Small Business Search or SUBNet systems.

(ii) Failure to designate and maintain a company official to administer the subcontracting program and monitor and enforce compliance with the plan.

(iii) Failure to submit an acceptable ISR, or the SSR, using the eSRS, or as provided in agency regulations, by the report due dates specified in 52.219-9 , Small Business Subcontracting Plan.

(iv) Failure to maintain records or otherwise demonstrate procedures adopted to comply with the plan including subcontracting flowdown requirements.

(v) Adoption of company policies or documented procedures that have as their objectives the frustration of the objectives of the plan.

(vi) Failure to pay small business subcontractors in accordance with the terms of the contract with the prime contractor.

(vii) Failure to correct substantiated findings from Federal subcontracting compliance reviews or participate in subcontracting plan management training offered by the Government.

(viii) Failure to provide the contracting officer with a written explanation if the contractor fails to acquire articles, equipment, supplies, services, or materials or obtain the performance of construction work as described in 19.704 (a)(12).

(ix) Falsifying records of subcontract awards to small business concerns.

(c) Documentation of good faith effort. If, at completion of the basic contract or any option, or in the case of a commercial plan, at the close of the fiscal year for which the plan is applicable, a contractor has failed to comply with the requirements of its subcontracting plan, which includes meeting its subcontracting goals, the contracting officer shall review all available information for an indication that the contractor has not made a good faith effort to comply with the plan. If no such indication is found, the contracting officer shall document the file accordingly.

(d) Notice of failure to make a good faith effort. If the contracting officer decides in accordance with paragraph (b) of this section that the contractor failed to make a good faith effort to comply with its subcontracting plan, the contracting officer shall give the contractor written notice in accordance with 52.219-16 , Liquidated Damages—Subcontracting Plan, specifying the material breach, which may be included in the contractor's past performance information, advising the contractor of the possibility that the contractor may have to pay to the Government liquidated damages, and providing a period of 15 working days (or longer period as necessary) within which to respond. The notice shall give the contractor an opportunity to demonstrate what good faith efforts have been made before the contracting officer issues the final decision and shall further state that failure of the contractor to respond may be taken as an admission that no valid explanation exists.

(e) Payment of liquidated damages.

(1) If, after consideration of all the pertinent data, the contracting officer finds that the contractor failed to make a good faith effort to comply with its subcontracting plan, the contracting officer shall issue a final decision to the contractor to that effect and require the payment of liquidated damages in an amount stated. The contracting officer's final decision shall state that the contractor has the right to appeal under the clause in the contract entitled Disputes. Calculations and procedures shall be in accordance with 52.219-16 , Liquidated Damages—Subcontracting Plan.

(2) The amount of damages attributable to the contractor's failure to comply shall be an amount equal to the actual dollar amount by which the contractor failed to achieve each subcontracting goal. For calculations for commercial plans see paragraph (f) of this section.

(3) Liquidated damages shall be in addition to any other remedies that the Government may have.

(f) Commercial plans. With respect to commercial plans approved under the clause at 52.219-9 , Small Business Subcontracting Plan, the contracting officer that approved the plan shall-

(1) Perform the functions of the contracting officer under this subsection on behalf of all agencies with contracts covered by the commercial plan;

(2) Determine whether or not the goals in the commercial plan were achieved and, if they were not achieved, review all available information for an indication that the contractor has not made a good faith effort to comply with the plan, and document the results of the review;

(3) If a determination is made to assess liquidated damages, in order to calculate and assess the amount of damages, the contracting officer shall ask the contractor to provide-

(i) Contract numbers for the Government contracts subject to the plan;

(ii) The total Government sales during the contractor’s fiscal year; and

(iii) The amount of payments made under the Government contracts subject to that plan that contributed to the contractor’s total sales during the contractor’s fiscal year; and

(4) When appropriate, assess liquidated damages on the Government’s behalf, based on the pro rata share of subcontracting attributable to the Government contracts. For example: The contractor’s total actual sales were $50 million and its actual subcontracting was $20 million. The Government’s total payments under contracts subject to the plan contributing to the contractor’s total sales were $5 million, which accounted for 10 percent of the contractor’s total sales. Therefore, the pro rata share of subcontracting attributable to the Government contracts would be 10 percent of $20 million, or $2 million. To continue the example, if the contractor failed to achieve its small business goal by 1 percent, the liquidated damages would be calculated as 1 percent of $2 million, or $20,000. The contracting officer shall make similar calculations for each category of small business where the contractor failed to achieve its goal and the sum of the dollars for all of the categories equals the amount of the liquidated damages to be assessed. A copy of the contracting officer’s final decision assessing liquidated damages shall be provided to other contracting officers with contracts subject to the commercial plan.

(5) Every contracting officer with a contract that is subject to a commercial plan shall include in the contract file a copy of the approved plan and a copy of the final decision assessing liquidating damages, if applicable.

19.706 Responsibilities of the cognizant administrative contracting officer.

The administrative contracting officer is responsible for assisting in evaluating subcontracting plans, and for monitoring, evaluating, and documenting contractor performance under the clause prescribed in 19.708 (b) and any subcontracting plan included in the contract. The contract administration office shall provide the necessary information and advice to support the contracting officer, as appropriate, by furnishing-

(a) Documentation on the contractor’s performance and compliance with subcontracting plans under previous contracts;

(b) Information on the extent to which the contractor is meeting the plan’s goals for subcontracting with eligible small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns;

(c) Information on whether the contractor’s efforts to ensure the participation of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns are in accordance with its subcontracting plan;

(d) Information on whether the contractor is requiring its subcontractors to adopt similar subcontracting plans;

(e) Immediate notice if, during performance, the contractor is failing to meet its commitments under the clause prescribed in 19.708 (b) or the subcontracting plan;

(f) Immediate notice and rationale if, during performance, the contractor is failing to comply in good faith with the subcontracting plan (see 19.705-7 (b) for more information on the determination of good faith effort); and

(g) Immediate notice that performance under a contract is complete, that the goals were or were not met, and, if not met, whether there is any indication of a lack of a good faith effort to comply with the subcontracting plan.

19.707 The Small Business Administration’s role in carrying out the program.

(a) Under the program, the SBA may-

(1) Assist both Government agencies and contractors in carrying out their responsibilities with regard to subcontracting plans;

(2) Review (within 5 working days) any solicitation that meets the dollar threshold in 19.702 (a)(1)(i) or (ii) before the solicitation is issued;

(3) Review (within 5 working days) before execution any negotiated contractual document requiring a subcontracting plan, including the plan itself, and submit recommendations to the contracting officer, which shall be advisory in nature; and

(4) Evaluate compliance with subcontracting plans, either on a contract-by-contract basis, or, in the case of contractors having multiple contracts, on an aggregate basis.

(b) The SBA is not authorized to-

(1) Prescribe the extent to which any contractor or subcontractor shall subcontract,

(2) Specify concerns to which subcontracts will be awarded, or

(3) Exercise any authority regarding the administration of individual prime contracts or subcontracts.

19.708 Contract clauses.

(a) Insert the clause at 52.219-8 , Utilization of Small Business Concerns, in solicitations and contracts when the contract amount is expected to exceed the simplified acquisition threshold unless-

(1) A personal services contract is contemplated (see 37.104 ); or

(2) The contract, together with all of its subcontracts, will be performed entirely outside of the United States and its outlying areas.

(1) Insert the clause at 52.219-9 , Small Business Subcontracting Plan, in solicitations and contracts that offer subcontracting possibilities, are expected to exceed $750,000 ($1.5 million for construction of any public facility), and are required to include the clause at 52.219-8 , Utilization of Small Business Concerns, unless the acquisition is set aside or is to be accomplished under the 8(a) program. When-

(i) Contracting by sealed bidding rather than by negotiation, the contracting officer shall use the clause with its Alternate I;

(ii) Contracting by negotiation, and subcontracting plans are required with initial proposals as provided for in 19.705-2 (d), the contracting officer shall use the clause with its Alternate II;

(iii) The contract action will not be reported in the Federal Procurement Data System pursuant to 4.606 (c)(5), or (c)(6), the contracting officer shall use the clause with its Alternate III; or

(iv) Incorporating a subcontracting plan due to a modification as provided for in 19.702 (a)(1)(iii), the contracting officer shall use the clause with its Alternate IV.

(2) Insert the clause at 52.219-16 , Liquidated Damages-Subcontracting Plan, in all solicitations and contracts containing the clause at 52.219-9 , Small Business Subcontracting Plan, or the clause with its Alternate I, II, III, or IV.

(1) The contracting officer may, when contracting by negotiation, insert in solicitations and contracts a clause substantially the same as the clause at 52.219-10 , Incentive Subcontracting Program, when a subcontracting plan is required (see 19.702 ), and inclusion of a monetary incentive is, in the judgment of the contracting officer, necessary to increase subcontracting opportunities for small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns, and is commensurate with the efficient and economical performance of the contract; unless the conditions in paragraph (c)(3) of this section are applicable. The contracting officer may vary the terms of the clause as specified in paragraph (c)(2) of this section.

(2) Various approaches may be used in the development of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns’ subcontracting incentives. They can take many forms, from a fully quantified schedule of payments based on actual subcontract achievement to an award-fee approach employing subjective evaluation criteria (see paragraph (c)(3) of this section). The incentive should not reward the contractor for results other than those that are attributable to the contractor’s efforts under the incentive subcontracting program.

(3) As specified in paragraph (c)(2) of this section, the contracting officer may include small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business subcontracting as one of the factors to be considered in determining the award fee in a cost-plus-award-fee contract; in such cases, however, the contracting officer shall not use the clause at 52.219-10 , Incentive Subcontracting Program.

IMAGES

  1. Small Business Subcontracting Plan Template

    difference between subcontracting plan and small business participation plan

  2. PPT

    difference between subcontracting plan and small business participation plan

  3. A Comprehensive Guide to Small Business Subcontracting Plans

    difference between subcontracting plan and small business participation plan

  4. Small Business Subcontracting Plan Template

    difference between subcontracting plan and small business participation plan

  5. PPT

    difference between subcontracting plan and small business participation plan

  6. Small Business Subcontracting Plan Template

    difference between subcontracting plan and small business participation plan

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COMMENTS

  1. PDF SMALL BUSINESS PARTICIPATION AND SMALL BUSINESS SUBCONTRACTING

    Broad differences between small business participation/commitment proposals and small business subcontracting plans Detailed information on both, including compliance Other...

  2. PDF Lesson 1: Subcontracting Program vs. SB Participation Overview

    Small Business Participation and Source Selection (cont'd), 5) State if small business participation is based on TCV and explain how percentages and dollars should be stated in the subcontracting plan (if a plan is required) 6) Explain how offers will be rated 7) Evaluate small business past performance (compliance with FAR 52.219-8 and/or FAR

  3. Small Business Subcontracting Plan vs. Participation Plan

    From what I have seen, the SBPP usually requires the Offeror to calculate the percentage of participation on total contract value (sometimes the offeror's price and sometimes the contract's ceiling value), while the SBSP usually requires the SB percentage of participation to be calculated using the value of the "total subcontracted dollars."

  4. What Is the Difference Between a Small Business Participation Plan & a

    The primary difference between a Small Business Participation Plan contract and a Small Business Subcontract lies in its goals. Since the Small Business Participation Plan allows...

  5. Small Business Participation Proposal

    The Small Business Participation proposalformat is designed to streamline and bring uniformity to responses and evaluations for Small Business Participation (FAR 15.304). The format provides clarity in that it is distinctly different than the Small Business Subcontracting Plan required for large businesses only (FAR 52.219-9).

  6. Participation plans offer better way to include small businesses

    By Kari Hawkins January 22, 2018 Understanding the difference between a Small Business Participation Plan and a Small Business Subcontracting Plan is important to ensure that...

  7. PDF Small Business Subcontracting Plans Evaluation of Small Business ...

    Scenario -. For an acquisition valued at $110.5M, the acquisition approach as documented on the DD Form 2579 recommends Full and Open Competition (F&OC) and is supported by a Market Research Report. What should be considered to develop an optimal subcontracting strategy? A. Subcontracting Plan Subcontracting Plan Requirement

  8. Small Business Subcontracting Plans and Evaluation of Small ...

    This tool is a summary of what a Small Business Subcontracting Plan is and what an Evaluation of Small Business Participation is. The document summarizes considerations Small Business Professionals should take into account to advise acquisition teams/contracting officers in developing a subcontracting strategy that maximizes opportunities for small businesses for an acquisition.

  9. PDF Frequently Asked Questions

    What is the difference between 8(a) certification and SDB certification? ... Small Business Participation Plan goals are based on the total contract value IAW DFARS 215.304. ... Small Business Participation Plan is a rated factor. Small Business Subcontracting Plan goals/targets are . based on total subcontracted dollars IAW FAR 19.701 ...

  10. Government Small Business Subcontracting Plan Tip and Notes

    A Small Business Participation Plan is the percentage (%) of work an Agency requires must be completed by a small business. In other words, how much a small business must participate. The reason for this is to involve small businesses in contracts and eliminate a Prime Contractor from being a "middle man."

  11. PDF Evaluating Small Business Participation

    Market Research Strategy Ask what is your interest in this requirement? To be the prime or a subcontractor, joint venture partner Acquisition Strategy Understand the requirement Types of work to be...

  12. PDF DoD SUBCONTRACTING PROGRAM The Basics of Subcontracting (Sept 2019)

    • Specifies that small businesses will have maximum practicable opportunity to participate in contract performance performance • Requires the agency to collect data on the extent to which the contractor meets the goals of the subcontracting plan • Section 15(g) Small Business Act - 15 USC 644(g) • 15 USC 637 Note

  13. A Comprehensive Guide to Small Business Subcontracting Plans

    If you have a federal contract over the Simplified Acquisition Threshold (SAT) of $750,000 and you are not a small business (qualifications explained in further detail below), then you will need a subcontracting plan.

  14. Prime and subcontracting

    In this plan, which follows the requirements of FAR 52.219-9, the prime contractor sets goals for what it plans to subcontract to small businesses, small disadvantaged businesses, women-owned small businesses, HUBZone small businesses, veteran-owned small businesses, and service-disabled veteran-owned small businesses.

  15. 19.704 Subcontracting plan requirements.

    (a) Each subcontracting plan required under 19.301-2(e) and 19.702(a)(1)(i), (ii), and (iii) shall include- (1) Separate percentage goals for using small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes) and women-owned small business ...

  16. For Small Businesses

    Respond to Sources Sought Notices and/or Request for Information and indicate your interest as a subcontractor. Ensure that the district/center Small Business office is aware of your interest in subcontracting opportunities on the specific contracting opportunity. Use Small Business Administration (SBA) resources. Attend site visits/industry days.

  17. PDF Small Business Participation and Small Business Subcontracting Plans

    DISCUSSION TOPICS General subcontracting overview Broad differences between small business participation/commitment proposals and small business subcontracting plans Detailed...

  18. Part 5119

    5119.602-3 Resolving differences between the agency and the Small Business Administration. Subpart 5119.7 - The Small Business Subcontracting Program. 5119.705 Responsibilities of the contracting officer under the subcontracting assistance program. 5119.705-2 Determining the need for a subcontracting plan. 5119.705-4 Reviewing the ...

  19. Participation plans offer better way to include small businesses

    For more information on Small Business Participation Plans and Subcontracting Plans, contact Letson in the AMCOM Office of Small Business Programs, 876-2230, [email protected] .

  20. Subcontracting

    FAR 19.702(a)(1): Except as stated in paragraph (b) of this section, section 8(d) of the Small Business Act (15 U.S.C. 637(d)) imposes the following requirements regarding subcontracting with small businesses and small business subcontracting plans: (i) In negotiated acquisitions, each solicitation of offers to perform a contract or contract ...

  21. 52.219-9 Small Business Subcontracting Plan.

    As prescribed in 19.708(b), insert the following clause:. Small Business Subcontracting Plan (Sep 2023) (a) This clause does not apply to small business concerns. (b) Definitions.As used in this clause— Alaska Native Corporation (ANC) means any Regional Corporation, Village Corporation, Urban Corporation, or Group Corporation organized under the laws of the State of Alaska in accordance with ...

  22. PDF Subcontracting Plans

    • 1. Individual Subcontracting Plan [FAR 19.704(a)] • 2. Master Subcontracting Plan [FAR 19.704(b)] • 3. Commercial Subcontracting Plan [FAR 19.704(d)] • 4. Comprehensive Subcontracting Plan [DFARS 219.702(1)] Federal Subk Plan Content Statutory requirements: required in support of federal/state/local government contracts For federal contracts:

  23. Subpart 19.7

    (a) Each subcontracting plan required under 19.301-2(e) and 19.702(a)(1)(i), (ii), and (iii) shall include- (1) Separate percentage goals for using small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes) and women-owned small business ...