Limitations On Subcontracting: FAR Change In The Works

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.

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Limitations On Subcontracting: Important New SBA Rule Takes Effect June 30, 2016

The SBA has issued a final rule implementing the changes to the limitations on subcontracting enacted by Congress in the 2013 National Defense Authorization Act.

The SBA’s final rule takes effect June 30, 2016–and will significantly change the way the limitations on subcontracting are calculated and enforced moving forward.

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WOSB Sole Source Authority Added To FAR

WOSB sole source authority is now part of the FAR.

Effective December 31, 2015, the FAR Council has adopted an interim rule incorporating the WOSB sole source authority adopted in the 2013 National Defense Authorization Act and recently made part of the SBA’s regulations.

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Subcontracting Plans: SBA Proposes Stronger Enforcement

Large businesses’ subcontracting plans would be subject to stricter compliance standards under a SBA proposed rule introduced December 29.

The intent of the new regulations is to compel prime contractors to make good faith efforts to comply with their subcontracting plans by implementing reporting mechanisms and harsher penalties for fraudulent actions or actions made in bad faith.  Small businesses subcontractors are likely to agree that these are positive changes.

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Ostensible Subcontractor Affiliation: SBA Proposes Exception For “Similarly Situated” Entities

The ostensible subcontractor affiliation rule would be modified to include an exception for “similarly situated” entities serving as subcontractors, if a recent rule change proposed by the SBA goes into effect.

Under the SBA’s proposal, a small business would be exempt from ostensible subcontractor affiliation with another small business for a small business set-aside contract, an 8(a) participant with another 8(a) participant for an 8(a) set-aside contract, and so on.

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Limitations on Subcontracting: SBA Proposes Sweeping Changes

The limitations on subcontracting would undergo sweeping changes under a recent SBA proposal.

On December 29, the SBA issued a proposed rule to enact the changes implemented by Congress in the National Defense Authorization Act of 2013–including a thorough re-write of the way that compliance with the subcontracting limits is calculated and enforced.

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SBA Proposed Rule Would Allow PTAC and SBDC Size Status Opinions

Small Business Development Centers and Procurement Technical Assistance Centers would be permitted to issue advisory small business size status opinions under a proposed rule published last week by the SBA.

The proposed rule, which implements a section of the 2013 National Defense Advisory Act, establishes a “safe harbor” from fraudulent misrepresentation penalties for a small business that obtains an advisory size opinion from a SBDC or PTAC.  But the proposed rule acknowledges that SBDCs and PTACs are not required to provide such advisory opinions–and that new funding will not be awarded for this purpose.

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