52.219-33 Nonmanufacturer Rule
Source: FAR 52.219-33 on acquisition.gov
The Nonmanufacturer Rule requires small business suppliers on set-aside contracts to provide products made by U.S. small businesses, not just resell large business goods.
Overview
FAR 52.219-33, the Nonmanufacturer Rule, establishes requirements for small business concerns that supply products they do not manufacture themselves under certain set-aside and sole-source contracts. The rule ensures that small businesses acting as suppliers or distributors provide products manufactured by other small businesses in the United States or its outlying areas, rather than simply reselling large business products. It also sets specific requirements for kit assemblers and clarifies when the rule applies based on contract type and acquisition method.
Key Rules
- Definitions of Manufacturer and Nonmanufacturer
- Clarifies what constitutes a manufacturer versus a nonmanufacturer, focusing on the extent of transformation or modification performed on the end item.
- Applicability
- Applies to set-aside and sole-source contracts for small business programs, certain orders under multiple-award contracts, and contracts using the HUBZone price evaluation preference (unless waived).
- Does not apply to unrestricted portions of partial set-asides or to contractors who are manufacturers.
- Nonmanufacturer Requirements
- Nonmanufacturers must supply end items manufactured by small businesses in the U.S. or outlying areas, be primarily engaged in retail/wholesale trade, and take ownership/possession of the items.
- Kit assemblers must ensure at least 50% of kit component costs are from small businesses in the U.S. or outlying areas.
Responsibilities
- Contracting Officers: Must ensure the clause is included in applicable contracts and verify compliance with the rule.
- Contractors: Must source products from qualifying small businesses, meet trade and possession requirements, and document compliance, especially for kits.
- Agencies: Oversee and enforce compliance with the nonmanufacturer rule in relevant procurements.
Practical Implications
- The rule prevents small business set-asides from being used to simply pass through products from large businesses, supporting the intent of small business programs.
- Contractors must carefully vet their supply chains and maintain documentation to prove compliance.
- Common pitfalls include misunderstanding the definition of manufacturer, failing to meet the 50% kit requirement, or not taking proper ownership of goods.
As prescribed in 19.507(h), insert the following clause:
Nonmanufacturer Rule (Sep 2021)
(a) Definitions. As used in this clause—
Manufacturer means the concern that transforms raw materials, miscellaneous parts, or components into the end item. Concerns that only minimally alter the item being procured do not qualify as manufacturers of the end item. Concerns that add substances, parts, or components to an existing end item to modify its performance will not be considered the end item manufacturer, where those identical modifications can be performed by and are available from the manufacturer of the existing end item.
Nonmanufacturer means a concern, including a supplier, that provides an end item it did not manufacture, process, or produce.
(b) Applicability.
(1) This clause does not apply to contracts awarded pursuant to the unrestricted portion of a partial set-aside or to a contractor that is the manufacturer of the product or end item.
(2) This clause applies to—
(i)Contracts that have been awarded pursuant to a set-aside, in total or in part, for any of the small business concerns identified in 19.000(a)(3);
(ii)Contracts that have been awarded on a sole-source basis in accordance with subparts 19.8, 19.13, 19.14, and 19.15;
(iii)Orders expected to exceed the simplified acquisition threshold and that are—
(A)Set aside for small business under multiple-award contracts, as described in 8.405-5 and 16.505(b)(2)(i)(F); or
(B)Issued directly to a small business concern under multiple-award contracts as described in 19.504(c)(1)(ii);
(iv)Orders, regardless of dollar value, that are—
(A)Set aside in accordance with subparts 19.8, 19.13, 19.14, and 19.15 under multiple-award contracts as described in 8.405-5 and 16.505(b)(2)(i)(F); or
(B)Issued directly to concerns that qualify for the programs described in subparts 19.8, 19.13, 19.14, and 19.15 under multiple-award contracts as described in 19.504(c)(1)(ii); and
(v)Contracts using the HUBZone price evaluation preference to award to a HUBZone concern unless the Contractor waived the evaluation preference.
(c) Requirements.
(1)The Contractor shall—
(i)Provide an end item that a small business has manufactured, processed, or produced in the United States or its outlying areas; for kit assemblers who are nonmanufacturers, see paragraph (c)(2) of this clause instead;
(ii)Be primarily engaged in the retail or wholesale trade and normally sell the type of item being supplied; and
(iii)Take ownership or possession of the item(s) with its personnel, equipment, or facilities in a manner consistent with industry practice; for example, providing storage, transportation, or delivery.
(2)When the end item being acquired is a kit of supplies, at least 50 percent of the total cost of the components of the kit shall be manufactured, processed, or produced in the United States or its outlying areas by small business concerns.
(End of clause)