Overview
This section outlines the procedures for evaluating an 8(a) participant's ability to perform a contract and establishes the mandatory minimum percentages of work that the participant must perform themselves, known as the "limitations on subcontracting."
Key Rules
- Performance Evaluation: The contracting officer may conduct a preaward survey; however, if the officer doubts the firm's ability to perform, they must refer the matter to the Small Business Administration (SBA) for a Certificate of Competency (COC) determination.
- Limitations on Subcontracting (LOS) Thresholds:
- Services (except construction): The participant must perform at least 50% of the cost of personnel with its own employees.
- Supplies/Manufacturing: The participant must perform at least 50% of the manufacturing costs (excluding materials).
- General Construction: The participant must perform at least 15% of the cost (excluding materials) with its own employees.
- Special Trade Construction: The participant must perform at least 25% of the cost (excluding materials) with its own employees.
- Compliance Periods: LOS compliance is typically measured by the end of the base term and each subsequent option period, or by the end of the performance period for individual orders, at the contracting officer's discretion.
- Waiver Authority: Only the SBA District Director has the authority to waive periodic compliance requirements (allowing a firm to exceed subcontracting limits during certain stages of performance), provided the contracting officer concurs and the firm assures ultimate compliance by the end of the contract.
Practical Implications
- Rigid Compliance Monitoring: 8(a) firms must strictly track their internal labor costs versus subcontractor costs to ensure they do not breach the LOS thresholds, as failure to comply can lead to the denial of future waivers and jeopardize their standing in the program.
- SBA Oversight: The contracting officer's authority is limited regarding performance capability and subcontracting waivers; in both instances, the SBA acts as the final arbiter through the COC process or District Director determinations.