Changes to Limitations on Subcontracting: My Game Changers Podcast

The limitations on subcontracting are undergoing some major changes in 2019, including a newly-effective DoD class deviation and the FAR Council’s long-awaited proposal for a comprehensive overhaul.

Recently, I joined host Michael LeJeune of RSM Federal on the Game Changers podcast to discuss these important changes. Click here to listen to my podcast, and be sure to check out the other great Game Changers podcasts featuring voices from across the government contracting landscape.

Limitations on Subcontracting: DoD Issues Comprehensive FAR Deviation

Earlier this week, the FAR Council issued a proposed rule to conform the FAR to the SBA’s regulation governing limitations on subcontracting.  But the DoD isn’t waiting around while the FAR Council finishes the process.

The DoD has issued a comprehensive FAR deviation, effective immediately.  The DoD’s FAR deviation will, effectively, temporarily conform the DoD’s use of the FAR to the SBA’s regulation while the FAR Council works on a final rule.

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Limitations on Subcontracting: FAR Council Finally Proposes Rule Change

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small government contractors, the disconnect between the SBA’s updated limitations on subcontracting rule and the FAR’s outdated rules has been very confusing.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.

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GAO: VA’s Compliance Oversight of Subcontracting Limitations Needs Improvement

Recently, the GAO issued a report discussing the VA’s Veterans First Program, made at the request of several members of Congress. The report focused on addressing ongoing implementation challenges regarding compliance with the Rule of Two following the Kingdomware decision.

One of the key challenges facing the VA is ensuring that SDVOSBs comply with the limitations on subcontracting. According to the GAO, the VA’s oversight needs improvement.

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Limitations on Subcontracting: FAR Revisions May Be Delayed

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.

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SDVOSB Set-Aside or Not? GAO Sustains Protest of Ambiguous VA Solicitation

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.

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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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