A former owner and officer of a large business has pleaded guilty to conspiracy charges stemming from an illegal pass-through scheme.
According to a Department of Justice press release, Thomas Harper not only conspired to evade limitations on subcontracting, but obstructed justice during a SBA size protest investigation of his company’s relationship with a putative small businesses.
The nonmanufacturer rule will not apply to small business set-aside contracts valued between $3,000 and $150,000, according to the SBA.
In its recent major rulemaking, the SBA exempts these small business set-aside contracts from the nonmanufacturer rule, meaning that small businesses will be able to supply the products of large manufacturers for these contracts without violating the limitations on subcontracting.
A 1099 independent contractor is a subcontractor–not an employee.
This guidance comes from the SBA’s major new rule on the limitations on subcontracting, in which the SBA responded to public questions about how independent contractors are to be treated.
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.
A protester challenging an awardee’s compliance with the FAR’s limitation on subcontracting faces an uphill battle.
As explained in a recent GAO bid protest decision, an offeror’s compliance with the limitation on subcontracting is presumed; a protester, therefore, must present specific evidence demonstrating that the awardee will not comply with the limitation. In many cases–especially when the solicitation does not require offerors to provide a breakdown of costs of the work performed by the prime and its subcontractors–such evidence may be next to impossible to obtain.
The SBA does not evaluate compliance with the limitations on subcontracting as part of the SBA size protest process.
In a recent decision, the SBA Office of Hearings and Appeals confirmed that subcontracting limits are the domain of the procuring agency, which is to consider compliance (or lack thereof) as part of its responsibility determination.
A SBA size determination, in which the SBA found a contractor to be an eligible small business for purposes of a particular procurement, was irrelevant to the question of whether the same contractor would violate the limitation on subcontracting under a different solicitation.
In a recent bid protest decision, the GAO (correctly) rejected the procuring agency’s argument that a recent SBA size determination was evidence that a contractor would comply with the subcontracting limitation.