Overview
FAR Part 19 implements the Small Business Act and mandates that executive agencies provide "maximum practicable opportunities" for small business concerns to participate in federal prime contracts and subcontracts. It establishes the policies and procedures for identifying small businesses, setting aside acquisitions for specific socioeconomic categories (8(a), HUBZone, SDVOSB, WOSB), and coordinating with the Small Business Administration (SBA).
Key Rules
- Size Standard Determination: Small business status is determined by North American Industry Classification System (NAICS) codes and corresponding size standards (either employee count or annual receipts) set by the SBA.
- The "Rule of Two": While the provided text focuses on the policy, Part 19 generally requires contracting officers to set aside acquisitions over the simplified acquisition threshold when there is a reasonable expectation that at least two responsible small businesses will submit offers at fair market prices.
- NAICS Appeals: Interested parties must appeal a Contracting Officer's NAICS code designation within 10 calendar days of the solicitation's issuance.
- Similarly Situated Entities: Prime contractors can count work performed by first-tier subcontractors toward "limitations on subcontracting" requirements, provided the subcontractor has the same socioeconomic status as the prime.
- Fair Market Price: Acquisitions for small businesses must be awarded at a "fair market price," which is based on reasonable costs under normal competitive conditions rather than the "lowest possible cost."
- Certificates of Competency (COC): If a Contracting Officer (CO) finds a small business non-responsible, they must refer the matter to the SBA. The SBA has the final authority to issue a COC, which requires the CO to award the contract.
Responsibilities
- Contracting Officers (COs):
- Assign the appropriate NAICS code to every solicitation.
- Divide large requirements into smaller lots to encourage small business participation.
- Document the contract file if an OSDBU recommendation to set aside a project is rejected.
- Review and monitor small business subcontracting plans for compliance.
- Heads of Contracting Activities: Responsible for effectively implementing small business programs and achieving agency-wide goals.
- Office of Small and Disadvantaged Business Utilization (OSDBU):
- Reports directly to the agency head or deputy.
- Identifies solicitations involving "bundling" and works to revise acquisition strategies to increase small business participation.
- Assists small businesses in obtaining payments and training.
- Small Business Administration (SBA) / Procurement Center Representatives (PCRs):
- Review proposed acquisitions and recommend set-asides.
- Evaluate appeals regarding size and status.
- Manage the 8(a) Business Development program.
- Offerors/Contractors:
- Must represent their size status in good faith at the time of initial offer.
- Must "rerepresent" status following a merger, acquisition, or after a specific period of time on a long-term contract.
Practical Implications
- Early Intervention is Critical: Because NAICS appeals have a strict 10-day window, small businesses must monitor "Pre-solicitation" notices and "Requests for Proposals" (RFPs) immediately to ensure the CO hasn't applied a code that excludes them or mischaracterizes the work.
- Market Research Drives Strategy: The CO’s decision to set aside a contract depends entirely on the data gathered during market research. If a small business fails to respond to "Sources Sought" notices, they risk the agency moving forward with a full and open competition.
- Subcontracting Compliance: For large businesses, the Subcontracting Plan is not a "formality." Failure to meet goals or demonstrate a good-faith effort can lead to liquidated damages or negative past performance ratings.
- The 2028 Shift: The regulations highlight a significant upcoming change (post-October 1, 2028) where COs will be required to assign multiple NAICS codes to distinct portions of multiple-award contracts, providing more granular opportunities for small businesses in specific functional areas.