The Department of Defense, the General Services Administration and NASA have proposed a rule change to the Federal Acquisition Regulations that would standardize the limitations on subcontracting across agencies while reducing the burden on small businesses contractors.
The proposed rule change, issued in the Federal Register Dec. 4, would adopt the Small Business Administration’s approach to addressing requirements made by the 2013 National Defense Authorization Act that limited the percentage of the contract that awardees could spend on a subcontractor.
“Prior to passage of section 1651 of the NDAA for FY2013, the limitations on subcontracting and the non-manufacturer rule were inconsistent across the small business programs,” the proposed rule states.
“For example, for awards under some small business programs, the prime contractor was required to perform a certain percentage of work itself, whereas under other programs, the prime contractor could include subcontracts to ‘similarly situated entities’ in the percentage of work it performed.”
The NDAA requirements, however, focus on limiting the award amount given to subcontractors, rather than percentages of work.
“As a result, the prime contractor no longer has to track the percentage of costs incurred that it spends performing work itself; it only has to track the percentage of the overall award amount (i.e., contract price) that it spends on subcontractors. For small businesses, this change will reduce a substantial burden associated with tracking and demonstrating compliance with the limitations on subcontracting,” the proposed rule says.
“These important changes give small businesses greater flexibility on how they choose to comply with the limitations on subcontracting. Under the current FAR clauses, there is only one way for a small business to comply with the limitations: it must spend the required amount on work performed in-house. As proposed in this rule, there will be more than one way to comply with the limitations, and the small business will be able to choose how to comply.”
These limitations on subcontracting, however, do not apply to small business set-aside contracts valued at less than $150,000.
Those interested in commenting on the proposed rule may do so through the federal eRulemaking portal or contacting GSA via mail by Feb. 4, 2019.