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, veteran-owned small businesses, service-disabled, veteran-owned small businesses, HUBZone small businesses, and small disadvantaged businesses. Depending on the type of plan negotiated, prime contractors are required to report either semi-annually or 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 through the Central Contractor Registration database at www.ccr.gov. 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 Government Accountability 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.
