Overview
This section prescribes the specific FAR clauses that contracting officers must include in solicitations and contracts to govern the utilization of small business concerns and the implementation of formal subcontracting plans. It establishes the dollar thresholds and conditions under which subcontracting requirements, liquidated damages, and incentive programs apply.
Key Rules
- FAR 52.219-8 (Utilization of Small Business Concerns): Must be included in all contracts exceeding the Simplified Acquisition Threshold (SAT), unless the contract is for personal services or is performed entirely outside the United States.
- FAR 52.219-9 (Small Business Subcontracting Plan): Mandatory for contracts offering subcontracting possibilities that exceed $900,000 ($2 million for construction of public facilities), provided the acquisition is not a small business set-aside or 8(a) procurement.
- Clause Alternates:
- Alt I: Used for sealed bidding.
- Alt II: Used for negotiated procurements where plans are required with initial proposals.
- Alt III: Used when specific FPDS reporting exceptions apply.
- Alt IV: Used when incorporating a plan via contract modification.
- FAR 52.219-16 (Liquidated Damages): This clause is mandatory whenever FAR 52.219-9 is present, providing a mechanism for the government to collect damages if the contractor fails to make a good faith effort to comply with the subcontracting plan.
- FAR 52.219-10 (Incentive Subcontracting Program): A discretionary clause for negotiated contracts that allows contracting officers to provide monetary rewards to contractors for exceeding small business subcontracting goals. It cannot be used if subcontracting performance is already addressed via award-fee evaluation.
Practical Implications
- Compliance Risk: Large prime contractors face significant financial risk via liquidated damages if they fail to meet the goals established in their subcontracting plans, making "good faith efforts" a critical documentation requirement.
- Operational Burden: For contracts exceeding the $900,000 threshold, contractors must be prepared to provide detailed reporting and manage different versions of the subcontracting clause (Alternates) depending on the procurement method.
- Performance Motivation: The optional incentive clause provides a tool for the government to drive socio-economic goals by turning small business participation into a profit-making opportunity for the prime contractor.