Overview
FAR 19.704 outlines the mandatory elements that must be included in a small business subcontracting plan and defines the administrative requirements for individual, master, and commercial plans. It ensures that prime contractors establish measurable goals for various small business categories and maintain accountability through standardized reporting and "good faith" commitments to their subcontractors.
Key Rules
- Mandatory Goal Categories: Plans must include separate percentage goals and dollar totals for Small Business (SB), Veteran-Owned SB (VOSB), Service-Disabled Veteran-Owned SB (SDVOSB), HUBZone SB, Small Disadvantaged Business (SDB), and Women-Owned SB (WOSB) concerns.
- Basis of Goals: Goals are generally calculated as a percentage of total subcontracting dollars; however, for individual plans, a Contracting Officer (CO) may also require goals to be calculated as a percentage of total contract value.
- Reporting Requirements: Contractors must use the Electronic Subcontracting Reporting System (eSRS) to submit Individual Subcontract Reports (ISR) semi-annually and Summary Subcontract Reports (SSR) annually.
- "Good Faith" Protections: Contractors are required to make a good faith effort to utilize the specific small businesses they identified in their bids or proposals. If they fail to do so, they must provide a written explanation to the CO within 30 days of contract completion.
- Flow-down Requirements: Prime contractors must flow down subcontracting plan requirements to any subcontractor (except small businesses) receiving a subcontract exceeding $900,000 ($2 million for construction).
- Plan Types:
- Master Plans: Effective for 3 years after CO approval; must be updated as changes occur.
- Commercial Plans: Preferred for contractors providing commercial products/services; effective for one fiscal year and covers all government contracts during that period.
- Timely Payment: Contractors must provide assurances that they will pay small business subcontractors on time and notify the CO of any reduced or late payments.
Practical Implications
- Administrative Rigor: Contractors must maintain sophisticated tracking and recording systems to capture subcontracting data by socio-economic category and ensure timely submission of reports in eSRS to avoid being found in non-compliance.
- Anti-"Bait and Switch": The requirement to provide a written explanation for not using a proposed small business subcontractor increases transparency and holds prime contractors accountable for the commitments made during the source selection process.
- Commercial Efficiency: Companies selling commercial items can significantly reduce their compliance burden by negotiating a single annual Commercial Plan rather than managing unique plans for every individual government contract.