Small Business Subcontracting
Federal prime contractors are required by law and regulation
to subcontract with small businesses whenever possible. In fact,
prime contractors awarded contracts over $500,000 are required
to submit small business subcontracting plans or suffer disqualification.
These small business subcontracting plans greatly multiply the
opportunities otherwise available to small business contractors.
Under the Small Business Subcontracting Plan clause, FAR §
52.219-9, a subcontract is broadly defined as any agreement (other
than one involving an employer employee relationship) entered
into between a prime contract and subcontractor to provide goods
or services needed for the performance of the prime contract.
The services a small business provides, however, need not be an
end item under the prime contract; it can also help satisfy the
prime contractor’s ordinary overhead requirements attributable
to the prime contract.
As required by the FAR, a small business subcontracting plan must
state the estimated dollar amount of business that the prime contractor
expects to award to small business contractors. Included in these
estimates are the expected dollar volume it proposes to subcontract
with small businesses generally, women-owned small businesses,
and small disadvantaged businesses. Prime contractors are required
to report annually the dollar amount they were successfully able
to subcontract with small businesses under their plans.
Each subcontracting plan must name a manager or contract person,
called a plan administrator, in charge of promoting compliance
under the plan. The plan administrator must seek new sources of
small businesses to fill the plan requirements.
Among other sources plan administrators can solicit small businesses
through small business associations, trade shows, or the SBA’s
PRO-Net, which is a small business database maintained by the
SBA. Major subcontractors maintain small business offices dedicated
to soliciting small business sources.
Rather than waiting by the telephone, however, a small business
can contact prime contractors directly to inform them of its small
business, woman-owned business, or small disadvantaged business
status. The larger the prime contract, the greater the possibility
that a small business will be able to participate in the overall
contract performance. A small business can also call agencies
directly to inform them of its availability for subcontracting
potentials.
In soliciting subcontracts, prime contractors often seek several
small business sources to insure they are obtaining a fair price.
To select a subcontractor from among several competitors, prime
contractors often follow the same general procedures used by agencies
when awarding competitive contracts under the FAR. However, if
a small business is dissatisfied with the treatment it receives
from a prime contractor, it generally will not be able to protest
irregularities with the agency or General Accounting Office.
In recent years, the FAR has strengthened the mandatory nature
of the small business subcontracting clause by imposing the possibility
of dollar penalties on contractors grossly failing to meet their
subcontracting plans. While penalties are rarely imposed, prime
contractors are increasingly cognizant of the need to subcontract
with competent small businesses whenever possible.
The solicitation of subcontracts from prime contractors should
be a regular part of the government marketing plan of any small
business, in addition to its pursuit of small purchase orders
and major bid opportunities. If you have not been pursuing subcontracting
opportunities, now is the time to start.
