Final Rule – Small Business Subcontracting Plans Effective November 1

Small Business Subcontracting Improvements on the way.

Craig Stetson, Director, Capital Edge Consulting

Final rule issued by the DoD, GSA and NASA July 14, 2016 to amend the FAR to add various improvements related to small business subcontracting (  These statutory amendments will affect prime contractor responsibilities on how they deal with subcontractors and report to the government.

Prime contractors should review now existing business system processes and capabilities to address these requirements to avoid potential compliance risks – including, for example, CPSR adequacy and past performance evaluation.

Among the changes:

  1. Requires prime contractors to make good faith efforts to utilize their proposed small business subcontractors during performance of a contract to the same degree the prime contractor relied on the small business in preparing and submitting its bid or proposal.
  2. To the extent a prime contractor is unable to make a good faith effort to utilize its small business subcontractors as described above, the prime contractor is required to explain, in writing, within 30 days of contract completion, to the contracting officer the reasons why it was unable to do so.
  3. Authorizes contracting officers to calculate subcontracting goals in terms of total contract dollars in addition to the required goals in terms of total subcontracted dollars.
  4. Provides contracting officers with the discretion to require a subcontracting plan in instances where a small business represents its size as an other than small business.
  5. Requires subcontracting plans even for modifications under the subcontracting plan threshold if said modifications would cause the contract to exceed the plan threshold.
  6. Requires prime contractors to assign North American Industry Classification System (NAICS) codes to subcontracts.
  7. Restricts prime contractors from prohibiting a subcontractor from discussing payment or utilization matters with the contracting officer.
  8. Requires prime contractors to resubmit a corrected subcontracting report within 30 days of receiving the contracting officer’s notice of report rejection.
  9. Requires prime contractors to provide the socioeconomic status of the subcontractor in the notification to unsuccessful offerors for subcontracts.
  10. Requires prime contracts with subcontracting plans on task and delivery order contracts to report order level subcontracting information after November 2017.


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