Subcontracting Assistance
Public Law 95-507

The Federal government's role in subcontracting assistance to small business has been changed significantly by P.L. 95-507, which amended Section 8(d) of the Small Business Act. Prior to the enactment of the law, the emphasis was on voluntary best efforts by co- operating prime contractors. Once contractors had made their make-or-buy decisions, they attempted to subcontract many of the buy items to small business. Over the years the percentage of small business subcontracts grew, but as Federal prime contracting became more complex and specialized, it was realized that more could and should be done for small business in subcontracting in the high-dollar, complex procurements.

P.L. 95-507 changed the emphasis from voluntary to mandatory and from best efforts to maximum practicable opportunity. The Act directs that Federal Government contracts greater than the simplified acquisition threshold shall contain a clause entitled, Utilization of Small Business Concerns and Small Business Concerns Owned and Controlled by Socially and Economically Disadvantaged Individuals.

For larger contracts, i.e., those over $500,000 ($1,000,000 for construction), the law also re- quires a subcontracting plan setting forth percentage goals for utilizing small business concerns, including separately identified goals for disadvantaged small business and women-owned small business. In addition, the prime contractor must describe the efforts it will take to as- sure that such firms have an equitable opportunity to compete for subcontracts.

For large negotiated contracts, the contracting officer may approve, cause to be modified, or reject the submitted subcontracting plan. Although the agency's contracting officer has the final decision, SBA may perform a pre-award review and evaluation of the subcontracting plan. In most cases, if SBA has serious objections to a proposed plan, the contracting officer will require the large business submitting the plan to make changes to overcome SBA's objections. If the contracting officer determines that the plan provides "the maximum practicable opportunity" for small, small disadvantaged, and women-owned business concerns to participate as subcontractors in the performance of the contract, the approved plan is incorporated as part of the con- tract. Failure by the large prime contractor to carry it out can constitute a material breach of the contract and, unless remedied, could result in termination.

For large sealed bid (as opposed to negotiated) contracts, the plan submitted by the successful bidder is incorporated into the contract and, if not carried out, can constitute a material breach. The plan is not negotiated ahead of time between the large business and the buying agency. If the agency's contracting officer believes that the subcontracting plan submitted does not reflect the best effort by the bidder to award subcontracts to small, small disadvantaged, and women-owned concerns to the fullest extent, the agency shall request a review by SBA. Although this request does not delay award of the contract, prior compliance of the bidder with such subcontracting plans shall be considered by the Federal agency in determining the responsibility of the bidder for the award of the contract.

Requirements for subcontracting plans do not apply to: small business prime contractors; contracts under the prescribed amounts; prime contracts not offering subcontracting possibilities; or contracts which are to be performed entirely outside the United States.

SBA has Commercial Market Representatives (CMRs) located throughout the country. Their basic responsibilities are to:

1. Assist small businesses in discovering and expanding subcontracting opportunities.

2. Work with large prime contractors to identify competent small business contractors, and assist     them in interpreting Section 8(d) and its implementing regulations, including the formulation of     subcontracting plans.

3. Conduct pre-award evaluation of subcontracting plans upon request.

4. Conduct post-award review and evaluation of contractually required subcontracting plans.

5. Conduct subcontract program reviews and compliance evaluations to make sure that prime     contractors are implementing their subcontracting program requirements under Section 8(d).

A "Small Business Subcontracting Directory" is available that provides a listing of large prime contractors by state and includes the name and telephone number of the Small Business Liaison officer at each company, along with a brief description of the company's product or service.