Laptops to Get Nonmanufacturer Rule Waiver?

The SBA said recently that it intends to issue a class waiver of the Nonmanufacturer Rule for laptop and tablet computers, freeing up small businesses to resell these products in bulk to the federal government.

The SBA recently announced its intent in the Federal Register, giving the public the opportunity to comment early in the New Year.

Assuming the change sticks, small businesses who sell laptops and tablets to the government through small business set-aside contracts will no longer have to ensure that they are supplying an end product manufactured by a small business.

By way of background, in order to ensure that federal contracting dollars earmarked for small businesses stay, for the most part, with those businesses, the government places a limit on how much of each contract can be subcontracted—50% for contracts for supplies or products.

Strict compliance in the realm of manufactured products means that the prime contractor must make at least half of the product. But, that’s not realistic, especially for small business resellers. Thus, there is an exception to the rule that allows a reseller under certain conditions to sell the government a product it did not help make. It’s called the Nonmanufacturer Rule. You can read more about it here.

The rule requires that the nonmanufacturer provide the end product of a domestic small business manufacturer or receive a waiver. The rule provides for individual or class waivers for an entire class of product. An individual waiver is like a request for a one-time waiver of the requirement. But a class waiver recognizes that, try as you might, you’re not going to be able to find a domestic small business that manufactures this type of product. For example, the SBA has had a class waiver in place for canned tuna since 1991.

Laptops and tablets would certainly seem to fit that bill. This class waiver was requested by an unknown entity, but whoever made the request told the SBA that “no small business manufacturers supply this product to the Federal Government.”

Such manufacturers operate under North American Industry Classification Code 334111, Electronic Computer Manufacturing. The code has a corresponding size standard of 1,250. That means that to be considered a domestic small business the company would have to make laptops here in the United States and have overall less than 1,250 employees. Hard to imagine.

Thus, the proposed class waiver would apply to “commercially available off-the-shelf laptop and tablet computers under NAICS code 334111/[Product Services Code] 7435.”

The SBA says: “If granted, the class waiver would allow otherwise qualified regular dealers to supply the waived item(s), regardless of the business size of the manufacturer[.]”

In other words, whether it’s a small business, SDVOSB, WOSB, HUBZone, or 8(a) set aside contract, a business will be able to sell computers made by Apple, Dell, Microsoft, etc., and still be considered a small business.

The SBA is taking public comment until January 16. Comments can be posted on Regulations.gov.

Questions about this post? Email us or give us a call at 785-200-8919.