|
OFFICE
OF MANAGEMENT AND BUDGET
OFFICE OF FEDERAL PROCUREMENT POLICY
Policy
Letter 99-X on Promoting Subcontracting Opportunities and Administering
Subcontracting Plans
AGENCY:
Executive Office of the President, Office of Management
and Budget (OMB), Office of Federal Procurement Policy (OFPP).
ACTION:
OFPP is requesting comments on a policy letter supplementing
the Federal Acquisition Regulation (FAR) to further promote subcontracting
opportunities for small, small disadvantaged, and women-owned small
business concerns.
SUMMARY:
This policy letter supersedes and cancels OFPP Policy Letters 80-1,
80-2, and 80-4. It supplements FAR coverage of subcontracting opportunities
for small, small disadvantaged, and women-owned small business concerns.
The current trend toward contract consolidation may impact these
small business concerns' ability to compete as prime contractors.
We are issuing this policy letter to enhance subcontracting opportunities
for such concerns.
COMMENT
DATE: Comments must be received on or before June 1, 1999.
ADDRESS:
Please submit comments to Deidre A. Lee, Administrator, Office of
Federal Procurement Policy, Old Executive Office Building, Room
352, Washington, DC 20503.
FOR
FURTHER INFORMATION CONTACT: Linda Williams at 202-395-3302.
Deidre
A. Lee
Administrator
Dated:
March 29, 1999
TO
THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT:
Policy on Promoting Subcontracting Opportunities and Administering
Subcontracting Plans
1.
Purpose. This directive supplements Federal Acquisition
Regulation (FAR) coverage of subcontracting plans required by section
8(d) of the Small Business Act (15 U.S.C. 637(d)) as amended by
the Federal Acquisition Streamlining Act of 1994 (FASA).
2.
Supersession Information. This Policy Letter supersedes
and cancels OFPP Policy Letter 80-1, "P.L. 95-507, Section 211,
Subcontracting: Agency Coordination with the Small Business Administration
Resident Procurement Center Representatives," dated January 24,
1980; OFPP Policy Letter 80-2, "Regulatory Guidance on Section 211
of Public Law 95-507," dated April 29, l980; Supplement No. 1 to
Policy Letter 80-2, dated May 29, 1981; and OFPP Policy Letter 80-4,
"Women's Business Enterprise Program," dated April 29, 1980.
3.
Authority. This Policy Letter is issued pursuant
to section 6 of the Office of Federal Procurement Policy Act, as
amended, 41 U.S.C. 405.
4.
Definitions.
- a.
The definitions of commercial plan, failure to make a good
faith effort to comply with the subcontracting plan, individual
contract plan, master plan, small business concern, small business
subcontractor, small disadvantaged business concern, and
women-owned small business concern have the same meaning
as that provided by FAR Part 19.
- b.
The term commercial item has the same meaning as that
provided by FAR section 2.101.
- c.
The term subcontract has the same meaning as that provided
by FAR section 19.701. However, purchases from a corporation,
company or division of a prime contractor that are affiliates
as defined in 13 C.F.R. 121.103 are not considered "subcontracts."
5.
Policy. This document establishes policies
for promoting subcontracting opportunities and administering
subcontracting plans for small business, small disadvantaged
business, and women-owned small business concerns. Nothing in
this Policy Letter precludes an agency from establishing additional
requirements regarding subcontracting plans.
6.
Solicitation and Subcontracting Plan Requirements
- a.
Determining the Need for a Subcontracting Plan. In addition
to the requirements contained at FAR section 19.705-2, the solicitation
shall inform prospective offerors that the estimated value of
indefinite delivery contracts/task order and delivery order contracts
will be used to determine if a subcontracting plan is required.
- b.
Reviewing the Subcontracting Plan. In addition to the
procedures contained at FAR section 19.705-4, contracting officers
shall take the following actions:
(1)
Require an offeror that proposes lower goals than the target goals
stated in the solicitation to explain why it cannot achieve the
stated goals.
(2)
Advise offerors of the availability of the following sources
of information on potential small, small disadvantaged, and
women-owned small business concern subcontractors:
- (a)
The U.S. Small Business Administration (SBA) Procurement Marketing
and Access Network (PRONet) ( http://pro-net.sba.gov/), a free
on-line internet-based search engine that provides access to the
profiles of more than 170,000 small businesses.
- (b)
The Department of Commerce, Minority Business Development Agency's
(MBDA) Phoenix Data Base or the Opportunity Data Base at www.mbda.gov.
- (c)
State, county, and city government minority business offices.
- (d)
Small, minority, and women business associations.
- (e)
Local chambers of commerce.
- (f)
DOD's Centralized Contractor Registration Data Base.
(3)
Encourage offerors to synopsize in the Commerce Business Daily
(CBD) or advertise in trade newspapers, journals, or other communication
media.
(4)
Require offerors to identify other contracts that had subcontracting
plans. Contact the contracting officers who administered those
earlier plans to determine whether the objectives were realized
and required reports were submitted on time. Overall compliance
should be considered, not merely whether the goals were met.
(5)
Ensure that subcontracting master plans meet the following conditions:
- (a)
The SBA procurement center representative has been given an opportunity
to comment on the master plan and,
- (b)
The subcontract goals for small, small disadvantaged, and women-owned
small business concerns are specifically set forth in each contract
or modification.
(6)
Follow the requirements of FAR clause 52.219.9 entitled "Small,
Small Disadvantaged and Women-Owned Small Business Subcontracting
Plan" if the award is expected to exceed $500,000 ($1 million
for construction of a public facility), unless the acquisition
is reserved for small business concerns, no subcontracting opportunities
exist, the contract will be performed entirely outside of any
state, territory, or possession of the United States, the District
of Columbia, and the Commonwealth of Puerto Rico, or the contract
is with Federal Prison Industries or the blind or severely disabled
and is awarded under the provisions of the Javits-Wagner-O'Day
Act. The clause shall apply to all other entities including
large businesses; state and local governments; non-profit organizations;
public utilities; educational institutions, including Historically
Black Colleges and Universities (HBCUs), Minority Institutions
(MIs), and foreign-owned firms that receive federal contracts
if the portion of the contract to be performed in the United
States exceeds the above thresholds. However, subcontracting
plans are not required from HBCUs and MIs that receive contract
awards above the thresholds from the Department of Defense (DOD),
the Coast Guard, and the National Aeronautics and Space Administration
(NASA).
(7)
Ensure that small disadvantaged and women-owned small business
concern dollars are included in the small business category.
This means, for example, that a small disadvantaged business
concern owned by a woman is counted as a small business concern,
a small disadvantaged business concern, and a women-owned small
business concern.
(8)
Ensure that the actual achievements on the SF 294, Subcontracting
Report for Individual Contracts, are reported on the same
basis as the goals set forth in the contract.
(9)
When subcontractors are required to adopt subcontracting plans
(see FAR section 19.704(a)(9)), require offerors to review,
approve, and monitor their subcontractors' compliance with such
plans. Copies of subcontractors' plans must be retained by the
prime contractor until subcontract completion. A "certificate
of compliance" or statement from the subcontractor that it has
a subcontracting plan does not satisfy this requirement.
- c.
Award of Contracts or Contract Modifications.
(1)
The Small Business Act treats contracts and modifications separately.
The following policies apply to contract modifications other than
options. If a subcontracting plan is not required at the time
of award because the contract value is below the threshold, a
subcontracting plan will not be required even if a subsequent
modification increases the contract value to an amount exceeding
the threshold. The only exception to this rule is when the contract
modification itself exceeds the threshold. Moreover, it is not
necessary to obtain another subcontracting plan for a modification
exceeding the applicable threshold if the contract already includes
a subcontracting plan. However, the original plan must be modified
to adjust the goals to account for the new effort.
(2)
The following policies apply to contractors and subcontractors
that no longer meet the size or ownership criteria for a small,
small disadvantaged, or women-owned small business concern as
a result of growth, a buy-out, or a merger during the period
of contract performance:
- (a)
A subcontracting plan is not required of any former small business
prime contractor that, during contract performance, no longer
meets the definition of a small business concern. Similarly, the
requirement to submit periodic reports does not apply. However,
a subcontracting plan is required if a prime contractor erroneously
considered itself small at the time of contract award. Under this
circumstance, the contracting officer should request a subcontracting
plan from the contractor and the responsibility to submit periodic
reports applies.
- (b)
A prime contractor may continue to report subcontract dollars
as a small, small disadvantaged, or women-owned small business
concern award for the duration of the subcontract, including all
option years.
- d.
Contract Awards Involving Commercial Plans.
(1)
Commercial plans, as described in FAR section 19.704(d), are
useful for companies that normally rely on their existing network
of suppliers for all of their business and do not enter into
specific subcontracts to fill Government contracts. Commercial
plans may apply to the production of the offeror's entire company,
or may be limited to a corporation, company, division, plant
or product line.
(2)
Commercial plans are recognized as one way to reduce the burden
of government-unique requirements for companies that provide
commercial items under Government contracts and subcontracts.
(3)
Agencies shall inform prospective offerors in solicitations
expected to trigger the requirements for a subcontracting
plan of the opportunity for them and/or their subcontractors
to develop commercial plans if they are supplying commercial
items.
(4)
Offerors shall state if there is a pre-approved plan and for
which item(s) and/or service(s) the plan has been approved.
(5)
The contracting officer shall obtain a copy of the plan and
approval document from a contractor who has a commercial plan
previously approved by another agency's contracting activity
or another federal agency.
- e.
Contract Administration of Subcontracting Plans. In addition
to the requirements at FAR section 19.706, administrative contracting
officers shall:
(1)
Monitor a contractor's compliance with the SF 294 report requirements.
The SF 294 is used to evaluate the contractor's progress toward
meeting the subcontracting goals established in an individual
contract plan. The contracting officer shall pay particular
attention to reviewing the SF 294 required at contract completion.
The SF 294 is not required for contracts with an approved commercial
plan.
(2)
Ensure receipt of and review the SF 295 (Summary Subcontracting
Report). The SF 295 is used to evaluate the contractor's progress
toward meeting the subcontracting goals in commercial plans.
The SF 295 also is used for both commercial plans and individual
plans to summarize all subcontract awards under contracts
with a particular federal agency.
7.
Best Practices. For purposes of this Policy
Letter, best practices are practical techniques gained from
experience that agencies may use to improve subcontracting plans.
The best practices are not mandatory and should not form the
basis for Inspector General or other audit reviews.
- a.
Subcontract Plan Evaluation.
(1)
DOD, Coast Guard, and NASA regulations require that the subcontracting
plan be a factor in evaluating bids or competitive proposals (10
U.S.C. 2323(h)(2)) under solicitations that require a plan. Other
agencies may use this approach as appropriate. For example, the
offeror's subcontracting plan may be a separate factor/subfactor
in complex, large dollar negotiated acquisitions, or consolidated
procurements, where substantial subcontracting opportunities exist.
As a separate evaluation factor/subfactor (apart from the offeror's
technical, management, and cost proposal), the subcontracting
plan should account for a meaningful percentage or weight of the
total evaluation. In cases where small businesses are bidding
against large contractors and small businesses are not required
to have a plan, contracting officers shall give small businesses
a rating equal to the maximum points available for those evaluation
factors/subfactors.
(2)
Agencies should define the parameters by which a subcontracting
plan will be evaluated. The parameters may include the following:
- (a)
The extent to which the plan expresses definitive commitments
to subcontracting with small, small disadvantaged, and women-owned
small business concerns. Greater credit may be given to an offeror
who identifies the names of the intended small, small disadvantaged,
and women-owned small business concerns with the initial submission
of its plan, and/or provides "letters of commitment" to subcontract
with such firms.
- (b)
The extent to which the plan provides a significant share of subcontracting
dollars to small, small disadvantaged, and women-owned small business
concerns.
- (c)
The quality of the offeror's overall plan, including its goals
and methods for achieving those goals.
- (d)
For individual contract plans, the offeror's procedures for reviewing,
approving, and monitoring its subcontractors' compliance with
subcontracting plans.
- (e)
The extent to which the offeror utilizes small business incumbents
with proven performance records as subcontractors under consolidated
contracts for services. Utilizing incumbents allows the government
to retain institutional knowledge, and small businesses to continue
providing quality services at advantageous prices.
- (f)
For mission-specific contracts such as high technology and research,
the extent to which the offeror plans to award subcontracts for
other than routine support services.
- (g)
The extent to which prime contractors have excelled in achieving
subcontracting goals or participated in a Mentor Protégé
Program.
- b.
Use of Past Performance in Source Selection.
(1)
The contracting officer may obtain information from the cognizant
contract administration office concerning an offeror's past performance
with respect to subcontracting with small, small disadvantaged,
and women-owned small business concerns. In addition, the contracting
officer may seek the advice of the agency's small business representative
and/or check with the SBA Area Director for Government Contracting
or the Defense Contract Management Command to determine the offeror's
current subcontracting performance rating.
(2)
In evaluating past performance, the contracting officer may
consider the following:
- (a)
The extent to which goals were achieved on contracts completed
during the current fiscal year and the two previous fiscal years,
with greater weight assigned to those contracts completed most
recently.
- (b)
The extent to which the offeror's subcontracting efforts were
consistent with its subcontracting plan or the extent to which
the offeror made a good faith effort to comply with its plan.
- (c)
The extent to which the offeror required its large business subcontractors
to adopt similar plans under the contract flow-down requirement.
- (d)
The extent to which an offeror complied with the timely and accurate
submission of the required SF 294 and SF 295.
- (e)
The extent to which the offeror participates in a Mentor Protégé
Program.
- c.
Awards and Incentives.
(1)
Contracting activities, in conjunction with Heads of Offices of
Small and Disadvantaged Business Utilization, may establish an
awards program for contracting officials and prime contractors
who do an outstanding job of promoting small, small disadvantaged,
and women-owned small business concerns as subcontractors. Recognition
may be in the form of plaques, certificates, monetary awards,
etc. The awards program may, among other things, recognize:
- (a)
Prime contractors that exceed all of their subcontracting goals;
- (b)
Contracting officials who are exemplary in administering and enforcing
compliance with subcontracting plans, and
- (c)
Small business and contracting specialists who demonstrate outstanding
outreach efforts to promote the use of small, small disadvantaged,
and women-owned small business concerns as subcontractors.
(2)
In addition to an awards program, contracting activities may
consider incentives such as:
- (a)
In contracts containing the Liquidated Damages clause at FAR section
52.219-16, requiring that a certain percentage of the contract
value be subcontracted to small business concerns. If the percentage
is not met, the contracting activity may assess liquidated damages.
- (b)
Making the administration and enforcement of subcontracting plans
a critical factor in the contracting officer's performance appraisal.
- (c)
Negotiating alternative payment schedules with prime contractors
that offer to provide substantial subcontracting opportunities
to small, small disadvantaged, and women-owned small business
concerns. This incentive also could be applied to prime contractors
that agree to mentor small business concerns under a Mentor Protégé
Program.
- (d)
Reducing inspection, monitoring, and auditing of subcontracting
compliance for prime contractors that have an outstanding past
performance record. For example, a contractor that receives an
outstanding rating on a subcontracting compliance review could
receive a follow-up review the next year that consists of a statistical
desk audit only. The SBA has authorized its field office staff
to exempt outstanding contractors from a formal compliance review
for three years as long as the SF 295 shows no deterioration
in the dollars awarded to small, small disadvantaged, and women-owned
small business concerns during that period.
- d.
Goals.
(1)
The contracting officer may use target goals in solicitations
to inform potential offerors of what the Government expects
in an acceptable subcontracting plan.
(2)
The contracting officer may specify subcontracting percentage
goals to increase small, small disadvantaged, and women-owned
business concern participation in newly consolidated contracts
for non-commercial items/services. The percentages may be
determined on a contract-by-contract basis based on market
research and requests for information from potential offerors
and potential small business subcontractors.
(3)
In addition to the statutory goals for small, small disadvantaged,
and women-owned small business concerns, which are based on
the projected value of the prime and subcontract awards proposed
by the offeror, the contracting officer may also establish
subcontracting goals based on the overall value of the procurement.
(Note: In some cases, this may not be a realistic approach.
The dollar value of the contract may have no effect on the
potential for subcontracting.)
(4)
The contracting officer may consider increasing the small,
small disadvantaged, and women-owned small business concern
participation goals commensurate with the size of the contract.
For example, the larger the degree of contract aggregation,
the higher the goals for small, small disadvantaged and women-owned
small business concern participation may be set.
8.
Responsibilities. The Federal Acquisition Regulatory
Council shall ensure that the policies established herein are
incorporated in the FAR within 210 days from the date this Policy
Letter is published in final form in the Federal Register.
Promulgation of final regulations within that 210-day period
shall be considered issuance in a "timely manner" as prescribed
in 41 U.S.C. 405(b).
9.
Information Contact. Questions regarding this
Policy Letter should be directed to Linda Williams, Deputy Associate
Administrator, Office of Federal Procurement Policy, 725 17th
Street, NW, Washington, DC 20503, telephone 202-395-3302, facsimile
202-395-5105.
10.
Judicial Review. This Policy Letter only provides
policy guidance to agencies in the exercise of their discretion
concerning Federal contracting. It does not interpret the Constitution
or any law. It is not intended to create any legal right or
any basis on which to sue the United States or its representatives.
11.
Effective Date. The Policy Letter is effective
30 days after the date of issuance.
Deidre
A. Lee
Administrator
|
