Overview
FAR 19.701 provides the foundational terminology for the Small Business Subcontracting Program, defining the various types of subcontracting plans, reporting mechanisms, and compliance standards. It establishes the legal boundaries for what constitutes a subcontract and sets the criteria for assessing contractor performance and payment behaviors toward subcontractors.
Key Rules
- Subcontracting Plan Types:
- Individual Plan: Specific to a single contract and covers the entire performance period, including options.
- Master Plan: Contains standardized "boilerplate" elements; it must be approved and does not contain goals until incorporated into an individual plan.
- Commercial Plan: Covers the contractor's entire fiscal year and applies to all commercial production, rather than a specific government contract.
- Compliance Thresholds: "Failure to make a good faith effort" is specifically defined as a willful or intentional failure to perform or an intentional action to frustrate the subcontracting plan.
- Financial Definitions:
- Total Contract Dollars: Must include the anticipated value of all options, which affects how subcontracting goals are calculated.
- Reduced/Untimely Payments: Payments are considered problematic if they are for less than the agreed amount or more than 90 days past due after the Government has already paid the prime contractor.
- Entity Status: Alaska Native Corporations (ANCs) and Indian Tribes are defined broadly to include subsidiaries and joint ventures, provided they meet specific statutory requirements under ANCSA or the Bureau of Indian Affairs.
Practical Implications
- Reporting Strategy: Contractors with high volumes of commercial sales can reduce administrative burdens by utilizing a Commercial Plan rather than tracking subcontracting data on a contract-by-contract basis.
- Performance Risks: Because "Reduced" and "Untimely" payments are explicitly defined, prime contractors face increased scrutiny and potential CPARS (Contractor Performance Assessment Reporting System) hits if they withhold funds from subcontractors after receiving payment from the agency.
- Goal Calculation: At the proposal stage, contractors must ensure their subcontracting percentages are based on the "Total Contract Value" (including all options), as underestimating this figure can lead to non-compliant subcontracting plans.