[Federal Register Volume 81, Number 247 (Friday, December 23, 2016)]
[Rules and Regulations]
[Pages 94246-94251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30874]
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121 and 125
RIN 3245-AG71
Credit for Lower Tier Small Business Subcontracting
AGENCY: U.S. Small Business Administration.
ACTION: Final rule.
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SUMMARY: The U.S. Small Business Administration (SBA) is amending its
regulations to implement section 1614 of the National Defense
Authorization Act for Fiscal Year 2014 (NDAA 2014). Section 1614
amended the Small Business Act to provide that where a prime contractor
has an individual subcontracting plan for a specific prime contract
with an executive agency, the prime contractor shall receive credit
towards its subcontracting plan goals for awards made to small business
concerns at any tier under the contract. The changes authorized by this
statute will allow an other than small prime contractor that has an
individual subcontracting plan for a contract to receive credit towards
its small business subcontracting goals for subcontract awards made to
small business concerns at any tier, to the extent reported on the
subcontracting plans of its lower tier subcontractors. The final rule
also implements the statutory requirements related to the
subcontracting plans of all subcontractors that are required to
maintain such plans, including the requirement to monitor
subcontractors' performance and compliance toward reaching the goals
set out in those plans as well as their compliance with subcontracting
reporting requirements. SBA is also clarifying that the size standard
for a particular subcontract must appear in the solicitation for the
subcontract.
DATES: This rule is effective on January 23, 2017.
FOR FURTHER INFORMATION CONTACT: Michael McLaughlin, Office of Policy,
Planning and Liaison, 409 Third Street SW., Washington, DC 20416; (202)
205-5353; [email protected].
SUPPLEMENTARY INFORMATION:
Introduction
The final rule implements Section 1614 of the National Defense
Authorization Act for Fiscal Year 2014, Public Law 113-66, December 26,
2013 (hereinafter NDAA 2014). Section 1614 amended section 8(d)(6)(D)
of the Small Business Act, 15 U.S.C. 637(d)(6)(d), to provide that
where a prime contractor has a subcontracting plan for a specific prime
contract with an executive agency, as required by Section 8(d) of the
Small Business Act, the prime contractor will receive credit towards
its subcontracting plan goals for awards made to small business
concerns at any tier under the contract, to the extent reported under
the subcontracting plan of a lower tier other than small subcontractor.
When a prime contractor awards a subcontract to a firm, it is generally
considered a first tier subcontract. That subcontractor may award a
subcontract, which would be considered a second tier subcontract, and
so on. Currently, with few exceptions, a prime contractor cannot
receive credit towards its small business subcontracting plan goals for
awards made below the first tier.
SBA is amending its regulations to require other than small
business prime contractors to count lower tier small business
subcontract awards towards their federal small business subcontracting
goals on unrestricted federal contracts, to the extent the lower tier
subcontractor are required to report the information. With limited
exceptions, unrestricted federal procurements and subcontracts over
$700,000 ($1.5 million for construction of any public facility) include
Federal Acquisition Regulation (FAR) clause 52.219-9 (Small Business
Subcontracting Plan), which requires other than small contractors and
their lower tier subcontractors to make a good faith effort to meet or
to exceed the small business subcontracting goals established in their
respective subcontracting plans. Failure to make this effort could
result in liquidated damages, default termination, and negative
performance reviews. For a subcontracting plan for a specific prime
contract, the contractor or subcontractor is required to submit an
Individual Subcontract Report (ISR) and Summary Subcontracting Report
(SSR). The ISR is submitted semiannually during contract performance
and upon contract completion. The SSR is submitted annually to
procuring agencies. Both forms are submitted through the Electronic
Subcontracting Reporting System (eSRS). Until this final rule, a large
prime contractor could not take credit for a subcontract award to a
second-tier small business subcontractor. Lastly, large prime
contractors are already required to identify the size standard that
applies to a subcontract. 13 CFR 121.410, 121.411, 125.3(c)(1)(v).
Subcontractor size representation is reviewed during compliance reviews
(See 13 CFR 125.3(f)(2)(i)) and size representations at
[[Page 94247]]
the subcontract level may be protested (See 13 CFR 121.411). In
addition, Section 868 of the National Defense Authorization Act of
2016, Public Law 114-92 (November 25, 2015), requires SBA, as part of
the its scorecard on agency small business prime contracting and
subcontracting performance, to compare ``The number of small business
concerns, small business concerns owned and controlled by service-
disabled veterans, qualified HUBZone small business concerns, small
business concerns owned and controlled by socially and economically
disadvantaged individuals, and small business concerns owned and
controlled by women awarded subcontracts in each North American
Industry Classification System code during the fiscal year and a
comparison to the number of awarded subcontracts during the prior
fiscal year, if available.''
SBA published a proposed rule regarding these changes in the
Federal Register on October 6, 2015. 80 FR 60300 (October 6, 2015). SBA
received a total of 13 comments. Two of these comments were generally
positive without offering any comments on specific provisions. SBA
received three comments that were generally opposed to the rule without
offering comment on specific provisions. These three commenters
generally felt that the statute and the regulations were likely to hurt
small business subcontractors rather than help them, and would likely
result in large prime contractors attempting to exert more control over
their subcontractors. SBA received one comment that was not relevant;
this comment made no mention of the proposed regulation.
Two commenters did not think that SBA's regulatory impact analysis
took into consideration the extra burden that large businesses would
have under these changes. The commenters claimed that the costs and
challenges of collecting the data are more than minimal, and that large
businesses will incur more than minimal costs. Neither commenter
provided data or analysis on what those costs would be, just a general
statement that they would be more than minimal. SBA addressed this
issue in its proposed rule. Any costs associated with the regulatory
implementation of these provisions of the NDAA 2014 will be included in
the proposed Federal Acquisition Regulation (FAR) changes. Thus, any
Paperwork Reduction Act (PRA) costs associated with proposed rulemaking
and implementation will occur during the FAR rulemaking process.
SBA received one comment seeking clarification that this rule and
credit for lower tier subcontracting does not affect Agencies' prime
contract goaling numbers. This rule only applies to subcontracting
plans, not to agency prime contract goaling requirements. Generally,
agencies do not count subcontracting dollars awarded to small business
concerns towards their prime contract goaling requirements, except for
the Department of Energy. This rule does not change reporting under the
SSR, which is how agencies receive credit for subcontracting. Firms
will continue to report only their first-tier subcontracts on the SSR.
SBA received one comment regarding enforcement of these regulations
prior to FAR regulatory implementation and updates to eSRS. As noted in
the proposed rule, it is SBA's position that this regulation will
require changes to FAR prior to full implementation in eSRS.
Summary of Proposed Rule, Comments, and SBA's Responses
Part 121
SBA proposed amending Sec. 121.411(b) allowing prime contractors
to accept a subcontractor's size certification electronically. The list
of enumerated methods is illustrative only, and is not exhaustive. SBA
received several comments on this issue, and all believed the proposed
change was positive, but that more clarity was needed about who may
accept the certifications, and whether this applied to socioeconomic
certifications. Thus, SBA is adopting the language as proposed, with
minor additions for clarity. The final rule now makes clear that prime
and subcontractors may rely on any form of electronic certification
that they deem appropriate provided it is given in connection with an
offer for specific subcontract and it includes the language in SBA's
regulation which provides that in order to accept an electronic
representation, the representation must be in connection with an offer
for a subcontract and the solicitation and subcontract provides that
the subcontractor verifies by submission of the offer that the size and
socioeconomic representations and certifications are current accurate
and complete as of the date of offer for the subcontract. See 13 CFR
121.411(b), 125.3(c)(1)(v).
Part 125
In proposed Sec. 125.3(a)(1), SBA included the new statutory
definition for a subcontract that was enacted by NDAA 2014. SBA
received one comment that requested more specificity with regard to
what will be considered a subcontract. Specifically, this commenter
wanted lists of what would and would not be considered a subcontract,
based in part on FAR definitions. The proposed definition is taken from
the statute, which was added by NDAA 2014, and SBA is adopting the
statutory definition in the final rule. See 15 U.S.C. 632(dd)(1).
In proposed Sec. 125.3(a)(1)(i)(C), SBA provided guidance on when
a prime contractor may receive credit for lower tier subcontracting.
Specifically, the proposed rule stated that only individual
subcontracting plans were entitled to receive the credit. SBA has
revised this section based on the comments. Specifically, the final
rule clearly states how commercial and individual plans differ, and
what the prime contractor's and subcontractor's responsibilities and
requirements are for individual subcontracting plans as required by the
Small Business Act. SBA received several comments asking for
clarification, and several comments asking SBA to also apply the new
guidelines to commercial subcontracting plans. SBA addressed this issue
in its proposed rule, ``Section 1614 applies only when determining
whether or not a prime contractor has met its individual subcontracting
plan goals. Thus, Section 1614 does not apply where the prime
contractor has a commercial plan or comprehensive subcontracting
plan.'' 80 FR 60300, 60301 (October 6, 2015). The Small Business Act
specifically states that the prime contractor shall receive lower tier
credit ``if the subcontracting goals pertain to a single contract with
the executive agency.'' 15 U.S.C. 637(d)(16)(A)(i). A commercial plan,
like a comprehensive subcontracting plan, applies to more than one
government contract, and thus the lower tier credit provisions do not
apply to those types of plans.
SBA received two comments on the issue of double counting and the
incorporation of subcontracting plans from lower tier, other than small
subcontractors. One commenter suggested that SBA amend the language of
the regulation and add examples to provide clarity. One commenter
requested that SBA remove the requirement that other than small
subcontractors are required to have their own subcontracting plan, if
their plan is incorporated into the prime contractor's plan. The
requirement that subcontractors have their own plan is an independent
statutory requirement that must be met. SBA has crafted the final rule
to make it clear that incorporation
[[Page 94248]]
of lower tier goals does not change the requirements of the lower tier
subcontractors to have its own subcontracting plans, meet their goals,
and report on its first tier performance. Further, the prime contractor
will continue to report on performance at the first tier level. The
prime contractor's performance towards its lower tier small business
subcontracting goals will be based on the reports of its other than
small lower tier subcontractors with subcontracting plans to the extent
that the lower tier subcontractor are required to report. The prime
contractor remains responsible for ensuring accurate reporting to the
government.
SBA received two comments on proposed Sec. 125.3(c)(1)(i), which
proposed to require that in order for a prime contractor to receive
credit for awards made at lower tiers, the prime contractor would be
required to have a complete subcontracting plan, including
incorporation of its subcontractor's goals, prior to award. The Small
Business Act requires that subcontracting plans be submitted,
negotiated, and approved before contract award. 15 U.S.C. 637(d)(4)(B)
and (C). The commenters contend that having all of the necessary steps
done and completed prior to award, including the incorporation of lower
tier subcontractor's plans, is not practicable on all contracts. The
commenters state that often the prime will not be aware of which
companies their subcontractors may be utilizing. The Small Business Act
provides that prime contractors ``shall'' receive credit for
subcontractors at any tier pursuant to a subcontracting plan required
by section 15 U.S.C. 637(d)(6)(D), which is the statutory requirement
to require other than small subcontractors to have subcontracting plans
if the subcontract exceeds certain threshold amounts. 15 U.S.C.
637(d)(16)(A)(i). Thus, the prime contractor with an individual
subcontracting plan will be obligated to consider and establish goals
based on the subcontracting plans of its other than small
subcontractors prior to award of the contract.
SBA proposed to amend Sec. 125.3(c)(1)(v) to clarify which NAICS
should apply to a subcontract and how primes should inform potential
subcontractors which NAICS and corresponding size standard will be
applied. SBA's regulations currently require that the prime contractor
(or subcontractor that is subcontracting to another concern) must
assign a NAICS code to the subcontract that best describes the work
being performed or the product being purchased by that subcontract. The
contractor may not simply pass down the NAICS assigned to the prime
contract to all subcontracts. SBA received five negative comments on
this requirement, and one comment that believed it would be in conflict
with the FAR. However, this is not a new requirement. SBA's current
regulations require that each subcontract have a NAICS assigned that
describes the work being performed under the subcontract, with the
corresponding size standard. While not a new requirement, SBA believes
it is important to reiterate why this requirement is necessary to
accurately reflect small business participation in subcontracting.
Utilizing the prime contract's NAICS for subcontracts may not always
accurately describe the work being done under that subcontract. SBA
does not have a one-size-fits-all definition of what a small business
is, because whether a firm is small depends largely on what type of
work it performs, or what type of product it supplies. Utilizing one
NAICS code for all subcontracts would distort the calculation of small
business subcontracting performance.
Several comments requested clarification on whether, based on the
wording of this rule, all subcontracts would require a solicitation.
That was not the intention of the regulation, and SBA has added a
sentence to the regulation to make this clear. However, it should also
be clear that the prime contractor (or lower tier subcontractor that is
subcontracting) assigning the NAICS to the subcontract is responsible
for providing notice of the size standard to prospective subcontractors
prior to acceptance and formation of a subcontract. This is necessary
to ensure that small businesses can accurately certify to their size
status. SBA also added parentheticals to make clear that this applies
to prime contractors and subcontractors.
SBA proposed to add Sec. 125.3(c)(1)(x) to implement 15 U.S.C.
637(d)(6)(D) of the Small Business Act, requiring prime contractors and
subcontractors with subcontracting plans to do various tasks in
connection with their subcontractors with subcontracting plans. SBA
received one negative comment stating the requirements were too
burdensome and one comment requesting clarification concerning whether
these requirements pertain to commercial subcontracting plans. SBA also
received a comment requesting that the requirements of this paragraph
and paragraph (xi) be required only if the prime contractor
incorporates its subcontractors' subcontracting plans. The requirements
articulated in the proposed rule are required by statute for all
subcontracting plans, and thus we are adopting the language as proposed
in the final rule. Subcontractors of primes with commercial plans do
not have to have subcontracting plans if the subcontract is for a
commercial item. Consequently, the requirements of Sec. 125.3(c)(1)(x)
apply to a prime with a commercial plan to the extent its
subcontractors have their own individual subcontracting plans, not
commercial plans
SBA received one comment stating that the dollar value thresholds
in SBA's rule are different than the recently updated FAR thresholds.
The revised inflation adjusted subcontracting plan thresholds became
effective after SBA issued the proposed rule, and SBA has updated the
thresholds in this final rule.
SBA proposed to add Sec. 125.3(c)(1)(xi) in order to incorporate
new requirements from the statute concerning the records the prime
contractor must maintain to demonstrate subcontractors at all tiers
comply with the subcontracting plan requirements. Two commenters noted
confusion as to what was meant by the phrase ``recite the types of
records the prime will maintain.'' SBA is changing language to make
clear that a written statement is required.
Finally, with respect to liquidated damages, the Small Business Act
provides that each contract subject to the requirements for a
subcontracting plan shall contain a clause for the payment of
liquidated damages upon a finding that a prime contractor has failed to
make a good faith effort to comply with the requirements imposed on
such subcontractor by section 8(d)(4)(F) of the Small Business Act, 15
U.S.C. 637(d)(4)(F). Thus, a prime contractor could be subject to
liquidated damages if it fails to make a good faith effort to review
and approve subcontracting plans submitted by its subcontractors;
monitor subcontractor compliance with its approved subcontracting
plans; ensure that subcontracting reports are submitted by its
subcontractors when required; acknowledge receipt of its
subcontractors' reports; compare the performance of its subcontractors
to subcontracting plans and goals; and discuss performance with
subcontractors when necessary to ensure its subcontractors make a good
faith effort to comply with their subcontracting plans.
[[Page 94249]]
Compliance With Executive Orders 12866, 13563, 12988, and 13132, the
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-612)
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
final rule is a significant regulatory action for the purposes of
Executive Order 12866. Accordingly, the next section contains SBA's
Regulatory Impact Analysis. This is not a major rule, however, under
the Congressional Review Act.
Regulatory Impact Analysis
1. Is there a need for the regulatory action?
The final regulations implement section 1614 of the National
Defense Authorization Act for Fiscal Year 2014. Section 1614(c)(3)
requires the Administrator to promulgate regulations necessary to
implement the Act.
2. What are the potential benefits and costs of this regulatory action?
The benefits of the final regulations are minimal and the final
costs cannot be determined until the FAR rules are proposed. Other than
small business prime contractors and subcontractors already establish
individual subcontracting plan goals and report on their achievements
if the subcontracting plan thresholds are met. Under section 1614 of
the NDAA 2014, a prime contractor with an individual subcontracting
plan will receive credit towards its goals for small business
performance at lower tiers. Thus, there will be some costs to the prime
contractor to propose subcontracting plan goals that incorporate small
business performance at lower tiers and to ensure that their
subcontractors have plans and submit required reports, and there will
also be costs to the Government to evaluate whether the prime
contractor's goals adequately address maximum practicable small
business subcontracting opportunity at all tiers. SBA estimates that
there were approximately 34,000 individual subcontracting plans in
fiscal year 2015, and that approximately 24,000 were at the prime
contract level. Other than small firms may have multiple individual
subcontracting plans at the prime and sub level, so the number of other
than small firms affected by this rule will be less than the number of
individual subcontracting plans, but we cannot say with any precision
how many will be impacted. There may also be costs to the Government as
eSRS may have to be modified to allow other than small prime
contractors to receive small business credit at any tier towards their
subcontracting plan goals. However, SBA is not able to estimate these
costs because the system will be modified when this rule is implemented
into the FAR and the process for capturing the lower tier reports is
further defined. There should not be any costs imposed on small
business concerns as this rule does not change any reporting or
recordkeeping requirements for small business concerns.
3. What are the alternatives to this final rule?
Many of the final regulations are required to implement specific
statutory provisions which require promulgation of implementing
regulations. There are no other alternatives that would meet the
statutory requirements.
Executive Order 13563
As part of its ongoing efforts to engage stakeholders in the
development of its regulations, SBA has solicited comments and
suggestions from the public and the procuring agencies on how to best
implement section 1614 of NDAA 2014. For example, SBA received comments
from the American Bar Association Section of Public Contract Law, the
Associated General Contractors of America, the Council of Defense and
Space Industry Associations, the U.S. Women's Chamber of Commerce, and
Women Impacting Public Policy (WIPP).
SBA has incorporated those comments and suggestions to the extent
feasible. SBA has considered the comments received in response to the
proposed rule and incorporated public input into the final rule to the
extent feasible.
Executive Order 12988
For purposes of Executive Order 12988, SBA has drafted this final
rule, to the extent practicable, in accordance with the standards set
forth in section 3(a) and 3(b)(2) of Executive Order 12988, to minimize
litigation, eliminate ambiguity, and reduce burden. This rule has no
preemptive or retroactive effect.
Executive Order 13132
For the purpose of Executive Order 13132, SBA has determined that
this final rule will not have substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
layers of government. Therefore, SBA has determined that this final
rule has no federalism implications warranting preparation of a
federalism assessment.
Paperwork Reduction Act, 44 U.S.C. Ch. 35
For purposes of the Paperwork Reduction Act (PRA), SBA has
determined that this final rule, if adopted in final form, would not
impose new government-wide reporting and recordkeeping requirements on
other than small prime contractors and subcontractors. If any
information collection procedures change or are amended during the
subsequent FAR rulemaking of this SBA rule, they will be addressed in
the FAR rulemaking process.
Regulatory Flexibility Act, 5 U.S.C. 601-612
According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601,
when an agency issues a rulemaking, it must prepare a regulatory
flexibility analysis to address the impact of the rule on small
entities. However, section 605 of the RFA allows an agency to certify a
rule, in lieu of preparing an analysis, if the rulemaking is not
expected to have a significant economic impact on a substantial number
of small entities. The RFA defines ``small entity'' to include ``small
businesses,'' ``small organizations,'' and ``small governmental
jurisdictions.'' This final rule concerns various aspects of SBA's
contracting programs. As such, the rule relates to small business
concerns, but would not affect ``small organizations'' or ``small
governmental jurisdictions'' because those programs generally apply
only to ``business concerns'' as defined by SBA regulations, in other
words, to small businesses organized for profit. ``Small
organizations'' or ``small governmental jurisdictions'' are non-profits
or governmental entities and do not generally qualify as ``business
concerns'' within the meaning of SBA's regulations.
This rule will impact other than small business concerns, as small
business concerns are not required to have subcontracting plans. Other
portions of the rule simply clarify existing regulations, and do not
impose new requirements on small business concerns. As discussed
previously, SBA's rules currently require firms to certify their size
and socioeconomic status in connection with subcontracts. This rule
simply clarifies that the requirement to certify applies to the
solicitation for the subcontract. In sum, the final rule will not have
a disparate impact on small businesses or impose any additional costs
on small business concerns. For the reasons discussed, SBA certifies
that this final rule will not have a significant economic impact on
[[Page 94250]]
a substantial number of small business concerns.
List of Subjects
13 CFR Part 121
Government contracts, Government procurement, Small businesses,
Size standards.
13 CFR Part 125
Government contracts, Government procurement, Reporting and
recordkeeping requirements, Small businesses, Small business
subcontracting.
For the reasons stated in the preamble, SBA amends 13 CFR parts 121
and 125 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. The authority citation for part 121 continues to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 662, and 694a(9).
0
2. Amend Sec. 121.411 by removing the second sentence in paragraph (b)
and adding two sentences in its place to read as follows:
Sec. 121.411 What are the size procedures for SBA's Section 8(d)
Subcontracting Program?
* * * * *
(b) * * * Prime contractors (or subcontractors) may accept paper
self-certifications as to size and socioeconomic status or a
subcontractor's electronic self-certification as to size or
socioeconomic status, if the solicitation for the subcontract contains
a clause which provides that the subcontractor verifies by submission
of the offer that the size or socioeconomic representations and
certifications are accurate and complete. Electronic submission may
include any method acceptable to the prime contractor (or
subcontractor) including, but not limited to, size representations and
certifications made in SAM (or any successor system) and electronic
conveyance of subcontractor certifications in prime contractor systems
in connection with an offer for a subcontract. * * *
* * * * *
PART 125--GOVERNMENT CONTRACTING PROGRAMS
0
3. The authority citation for part 125 continues to read as follows:
Authority: 15 U.S.C. 632(p), (q); 634(b)(6), 637, 644, 657f, and
657q.
0
4. Amend Sec. 125.3 as follows:
0
a. Revise paragraph (a)(1) introductory text;
0
b. Add paragraph (a)(1)(i)(C);
0
c. Add paragraph (a)(1)(i)(D);
0
d. Revise the heading for paragraph (c);
0
e. Amend paragraph (c)(1) by removing ``$650,000'' and adding in its
place ``$700,000'';
0
f. Revise the first sentence of paragraph (c)(1)(i);
0
g. Revise paragraph (c)(1)(v);
0
h. Remove the word ``and'' at the end of paragraph (c)(1)(viii);
0
i. Remove the period at the end of paragraph (c)(1)(ix) and add in its
place a semi-colon and the word ``and''; and
0
j. Add new paragraphs (c)5(1)(x) and (xi).
The additions and revisions read as follows:
Sec. 125.3 What types of subcontracting assistance are available to
small businesses?
(a) * * *
(1) Subcontract under this section means a legally binding
agreement between a contractor that is already under contract to
another party to perform work and a third party (other than one
involving an employer-employee relationship), hereinafter referred to
as the subcontractor, for the subcontractor to perform a part or all of
the work that the contractor has undertaken.
(i) * * *
(C) Where the prime contractor has an individual subcontracting
plan, the prime contractor shall establish two sets of small business
subcontracting goals, one goal for the first tier and one goal for
lower tier subcontracts awarded by other than small subcontractors with
individual subcontracting plans. Under individual subcontracting plans
the prime contractor shall receive credit for small business concerns
performing as first tier subcontractors (first tier goal) and
subcontractors at any tier pursuant to the subcontracting plans
required under paragraph (c) of this section in an amount equal to the
dollar value of work awarded to such small business concerns (lower
tier goal). Other-than-small, lower tier subcontractors must have their
own individual subcontracting plans if the subcontract is at or above
the subcontracting plan threshold, and are required to make a good
faith effort to meet their subcontracting plan goals. The prime
contractor and any subcontractor with a subcontracting plan are
responsible for reporting on subcontracting performance under their
contracts or subcontracts at their first tier. The prime contractor's
performance under its individual subcontracting plan will be calculated
using its own reporting at the first tier for its first tier goal and
its subcontractors' first tier reports under their plans for the lower
tier subcontracting goals. The prime contractor's performance under the
individual subcontracting plan must be evaluated based on its combined
performance under the first tier and lower tier goal.
(D) Other-than-small prime contractors and subcontractors with
subcontracting plans shall report on their subcontracting performance
on the Summary Subcontracting report (SSR) at their first tier only.
* * * * *
(c) Additional responsibilities of other than small contractors. *
* *
(1) * * *
(i) Submitting and negotiating before award an acceptable
subcontracting plan that reflects maximum practicable opportunities for
small businesses in the performance of the contract as subcontractors
or suppliers at all tiers of performance. * * *
* * * * *
(v) The contractor must assign to each subcontract, and to each
solicitation, if a solicitation is utilized, the NAICS code and
corresponding size standard that best describes the principal purpose
of the subcontract (see Sec. 121.410 of this chapter). A formal
solicitation is not required for each subcontract, but the contractor
must provide some form of written notice of the NAICS code and size
standard assigned to potential offerors prior to acceptance and award
of the subcontract. The prime contractor (or subcontractor) may rely on
a subcontractor's electronic representations and certifications, if the
solicitation for the subcontract contains a clause which provides that
the subcontractor verifies by submission of the offer that the size or
socioeconomic representations and certifications are current, accurate
and complete as of the date of the offer for the subcontract.
Electronic submission may include any method acceptable to the prime
contractor (or subcontractor) including, but not limited to, size or
socioeconomic representations and certifications made in SAM (or any
successor system). A prime contractor (or subcontractor) may not
require the use of SAM (or any successor system) for purposes of
representing size or socioeconomic status in connection with a
subcontract;
* * * * *
(x) Except when subcontracting for commercial items, the prime
contractor must require all subcontractors (except small business
concerns) who receive subcontracts in excess of $1,500,000 in
[[Page 94251]]
the case of a subcontract for the construction of any public facility,
or in excess of $700,000 in the case of all other subcontracts, and
which offer further subcontracting possibilities, to adopt a
subcontracting plan of their own consistent with this section, and must
ensure at a minimum that all subcontractors required to maintain
subcontracting plans pursuant to this paragraph will review and approve
subcontracting plans submitted by their subcontractors; monitor their
subcontractors' compliance with their approved subcontracting plans;
ensure that subcontracting reports are submitted by their
subcontractors when required; acknowledge receipt of their
subcontractors' reports; compare the performance of their
subcontractors to their subcontracting plans and goals; and discuss
performance with their subcontractors when necessary to ensure their
subcontractors make a good-faith effort to comply with their
subcontracting plans; and
(xi) The prime contractor must provide a written statement of the
types of records it will maintain to demonstrate procedures which have
been adopted to ensure subcontractors at all tiers comply with the
requirements and goals set forth in the subcontracting plan established
in accordance with paragraph (c)(1)(x) of this section, including the
establishment of source lists of small business concerns, small
business concerns owned and controlled by veterans, small business
concerns owned and controlled by service-disabled veterans, qualified
HUBZone small business concerns, small business concerns owned and
controlled by socially and economically disadvantaged individuals, and
small business concerns owned and controlled by women; the efforts to
identify and award subcontracts to such small business concerns; and
size or socioeconomic certifications or representations received in
connection with each subcontract.
* * * * *
Dated: December 14, 2016.
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016-30874 Filed 12-22-16; 8:45 am]
BILLING CODE 8025-01-P