Recently, GAO published a report on small business subcontracting plan compliance, concluding that agency oversight of these plans need improvement.
As many of our readers know, some federal contracts require large business prime contractors to utilize small business subcontractors under a small business subcontracting plan, as described in FAR 52.219-9. For context, in 2019, federal agencies “awarded more than 5,000 contracts requiring a small business subcontracting plan, and obligated more than $300 billion to contracts with required small business subcontracting plans.”
If a small business subcontracting plan is in place, contractors are required to report on any subcontracting achievements and make a “good-faith” effort to keep to the plan. In addition, some regulations and procedures require contracting officers to review the subcontracting plan before or after award to make sure certain information is included in the plan. Agencies are also required to provide SBA Procurement Center Representatives (or PCRs) the opportunity to review the proposed contract and associated subcontracting plan.
After a contract is in place, the FAR requires contracting officers to ensure that subcontracting reports are submitted via the eSRS web platform within a certain amount of time. Contracting officers must then review and decide whether to accept these reports. In addition to reviewing the reports, agencies are also required to perform annual evaluations of all contractor performance though CPARS (the Contractor Performance Assessment Reporting System). One aspect of the annual CPARS evaluation, where applicable, is compliance with the contractor’s small business subcontracting plan.
Despite the amount of oversight agencies appear to have over contractor compliance with small business subcontracting plans on paper, some folks at the Department of Defense were concerned about how much actual oversight agencies were providing to ensure contractors complied with their plans. Thus, GAO looked into how four representative agencies (the DLA, the Navy, GSA, and NASA) provide oversight. It found that the DoD was right to be concerned.
First, GAO looked to pre-award procedures for reviewing subcontracting plans. It found that COs from all four representative agencies reviewed and approved subcontracting plans as required in most, but not all, cases. More problematically, however, the “[a]gencies also could not demonstrate they followed procedures related to PCR reviews in about half of the contracts reviewed.” Put differently, most of the time, the SBA wasn’t involved in reviewing subcontracting plans before contract award, as required.
Next, GAO turned to agency overview of contractor compliance with their subcontracting plans post-award. GAO found this overview was pretty “limited”. Even though each representative agency did offer some amount training to contracting officers on subcontracting plans, GAO found that these contracting officers did not ensure contractors met their reporting requirements in most of the reviewed contracts. In addition, even where reports were submitted as required, many were not reviewed in the manner anticipated.
As a result of its investigation, GAO offered ten recommendations for the reviewed agencies and the SBA. These recommendations are outlined here, but in summary, they ask the relevant agencies to make sure they have steps in place to ensure appropriate review of subcontracting plans and contractor compliance with those plans.
Overall, an increased focus on compliance with subcontracting plans is likely to have an effect on many contractors–hopefully ensuring more contracting dollars go to small business subcontractors. For more on small business subcontracting plans, check out our related blog posts here.
Questions about this post? Email us or give us a call at 785-200-8919.
Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook.