For small government contractors, the disconnect between the SBA’s updated limitations on subcontracting rule and the FAR’s outdated rules has been very confusing. For more than two years, the FAR and SBA regulation have used different formulas to determine compliance, and the SBA rule–but not the FAR–allows the use of “similarly situated entities” on small business set-asides and 8(a) contracts.
This has created major headaches for small businesses, who have had no definitive answer to what should be a simple question: “which rule do I follow?” Now, finally, there is some important progress to report in clearing up this discrepancy: yesterday, the FAR Council issued a proposed rule to update the FAR’s limitations on subcontracting provisions and conform them to the SBA’s rule.
At least a couple times a month, I’m asked when the FAR’s limitations on subcontracting provisions will be updated to correspond with SBA regulations adopted in 2016, and underlying statutory changes adopted way back in the 2013 National Defense Authorization Act.
Well, now it seems that the FAR updates may take longer than I’d hoped. In its most recent “Open Cases” update, the FAR Council says that it’s made a switch in the procedure that will be used to implement the changes to the limitations on subcontracting–and that switch will likely delay the implementation of those changes by several months.
A procurement may not be set aside for SDVOSB concerns without also including mandatory VA set-aside VAAR provisions, including the limitation on subcontracting.
In a recent bid protest decision, the GAO held that a solicitation was flawed where the cover sheet indicated that the solicitation would be set aside for SDVOSBs, but the solicitation omitted the mandatory VAAR SDVOSB set-aside clause.
It’s been more than a year since the SBA issued a final rule overhauling the limitations on subcontracting for small business contracts. The SBA’s rule, now codified at 13 C.F.R. 125.6, changes the formulas for calculating compliance with the limitations on subcontracting, and allows small businesses to take credit for work performed by similarly situated subcontractors.
But the FAR’s corresponding clauses have yet to be changed, and this has led to a lot of confusion about which rule applies–especially since many contracting officers abide by the legally-dubious proposition that “if it ain’t in the FAR, it doesn’t count.” Now, finally, there is some good news: the FAR Council is moving forward with a proposed rule to align the FAR with the SBA’s regulations.