Statutory requirements
Contracts over $750,000 ($1.5 million for construction) require large businesses to submit and comply with a small business subcontracting plan, or risk ineligibility for award and potential penalties.
Overview
FAR 19.702 establishes statutory requirements for subcontracting with small businesses on federal contracts exceeding the simplified acquisition threshold. It mandates that prime contractors provide maximum practicable opportunities for small business, veteran-owned, service-disabled veteran-owned, HUBZone, small disadvantaged, and women-owned small businesses to participate in contract performance. The regulation requires submission and negotiation of acceptable subcontracting plans for contracts and modifications above $750,000 ($1.5 million for construction) with subcontracting possibilities, except in specified cases. It also outlines consequences for failing to comply in good faith with subcontracting plans, including material breach and liquidated damages. Special provisions apply for mentor-protégé programs under both DoD and SBA, allowing certain developmental assistance costs to count toward subcontracting goals under approved agreements.
Key Rules
- Subcontracting Plan Requirement
- Contracts and modifications above $750,000 ($1.5 million for construction) with subcontracting possibilities require an acceptable subcontracting plan from large businesses.
- Exceptions
- Small businesses, personal services contracts, contracts performed entirely outside the U.S., and certain modifications are exempt from the subcontracting plan requirement.
- Good Faith Compliance
- Failure to comply in good faith with a subcontracting plan is a material breach and may result in liquidated damages.
- Mentor-Protégé Credits
- Approved mentor-protégé agreements allow certain developmental assistance costs to count toward subcontracting goals.
Responsibilities
- Contracting Officers: Ensure inclusion of subcontracting plan requirements in solicitations and enforce compliance.
- Contractors: Submit, negotiate, and comply with subcontracting plans; ensure timely payment to small business subcontractors; maintain good faith efforts.
- Agencies: Oversee compliance, approve mentor-protégé agreements, and enforce penalties for noncompliance.
Practical Implications
- Ensures small businesses have real opportunities in federal contracting.
- Noncompliance can result in loss of contract award or financial penalties.
- Contractors must carefully track and document subcontracting efforts and payments to small businesses.