Statutory requirements
Contracts over $900,000 ($2 million for construction) require non-small business prime contractors to submit and comply with a small business subcontracting plan or risk ineligibility and penalties.
Overview
FAR 19.702 establishes statutory requirements for subcontracting with small businesses in federal contracts exceeding the simplified acquisition threshold. It mandates that prime contractors provide maximum practicable opportunities for small business, VOSB, SDVOSB, HUBZone, SDB, and WOSB concerns to participate in contract performance. The section outlines when subcontracting plans are required, exceptions, consequences for non-compliance, and special provisions for mentor-protégé programs.
Key Rules
- Subcontracting Plan Requirement
- For contracts expected to exceed $900,000 ($2 million for construction) with subcontracting possibilities, offerors/bidders who are not small businesses must submit an acceptable subcontracting plan or be ineligible for award.
- Applicability to Modifications
- Contract modifications that push the contract value above the threshold require a plan if subcontracting opportunities exist.
- Multiple-Award Contracts
- For contracts with multiple NAICS codes, plans may cover specific portions/categories or the entire proposal/contract, based on where the contractor is other than small.
- Exceptions
- Small businesses, personal services contracts, contracts performed entirely outside the U.S., and certain modifications are exempt from the 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 firms may count certain developmental assistance costs as subcontract awards for plan goal attainment, with special provisions for covered territory businesses and Puerto Rico.
Responsibilities
- Contracting Officers: Ensure inclusion and enforcement of subcontracting plan requirements, determine applicability, and monitor compliance.
- Contractors: Submit and adhere to acceptable subcontracting plans, ensure timely payment to small business subcontractors, and maintain good faith efforts.
- Agencies: Oversee compliance, approve mentor-protégé agreements, and enforce penalties for non-compliance.
Practical Implications
This section ensures small businesses have real opportunities in federal contracting and that large contractors are held accountable for their subcontracting commitments. Contractors must be diligent in plan preparation, timely submission, and ongoing compliance to avoid ineligibility or penalties. Mentor-protégé arrangements offer additional flexibility but require proper approvals and documentation.