The Small Business Administration (SBA) Office of Inspector General (OIG) has a mission to “provide independent, objective, and timely oversight to improve the integrity, accountability, and performance of SBA and its programs.” As part of this mission, it investigated and recently issued a report on the federal government’s “oversight work to identify opportunities to strengthen federal-wide compliance with limitations on subcontracting requirements for set-aside awards.” The SBA’s rules on limitations on subcontracting limit how much of a federal contract a small business prime contractor can subcontract to subcontractors that are not similarly situated. OIG identified a number of areas where federal agencies could improve their oversight of small business subcontracting, noting “recurring deficiencies in the federal contracting community’s ability to interpret the rule’s requirements, apply them consistently, and monitor and enforce compliance throughout the life of a contract.” SBA has indicated it will issue a revised rule to address some of these concerns. Let’s take a look.
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GovCon FAQs: What Costs Can I Exclude From Limitations on Subcontracting Calculations?
If your small business performs federal government contracts, chances are, you’ve already calculated your small business’s compliance with the applicable limitation on subcontracting (LoS) a time or two. But whether you’re new to the LoS equation–or you’ve long since mastered that math–knowing which costs you can exclude from your calculations is vital. Indeed, such can impact everything from the accuracy of a bidder’s regulatory compliance representations and certifications to a contractor’s critical contract performance and subcontracting decisions. In fact, under current SBA affiliation regulations, LoS compliance can even provide a defense to certain contract-specific findings of affiliation. But calculating LoS compliance and determining exactly which costs to include and exclude on a given contract is not always easy or straightforward. And that’s why we so frequently get this question and break down the answer in this article.
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