Tag Archives: Subcontracting

Subcontractors And Past Performance: What Are The Risks?

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Inexperienced small government contractors sometimes rely primarily (or completely) on larger subcontractors to boost their past performance scores.  Although this practice sometimes results in better past performance scores, there are two risks small government contractors should be aware of when it comes to relying on a subcontractor’s past performance: poor evaluations and ostensible subcontractor affiliation.

A recent GAO bid protest decision, coupled with a decision of the SBA Office of Hearings and Appeals, demonstrates how each risk may affect a small government contractor.

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Convictions in Massive DOT DBE Fraud Case Put Spotlight on Illegal Small Business “Pass-Throughs”

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“Guilty.”

That was the verdict Pennsylvania jurors handed down on 26 of 30 charges against Joseph W. Nagle, stemming from what an FBI press release called a 15-year scheme to commit fraud within the DOT’s Disadvantaged Business Enterprise program.  Nagle, the former president, CEO and part-owner of Schuylkill Products Inc. was convicted of conspiracy to defraud the DOT, 11 counts of wire fraud, six counts of mail fraud, and 11 counts of money laundering, among other charges.  Nagle faces the possibility of many years in federal prison and millions of dollars in fines and restitution.

Nagle’s crimes, which involved using a small company as a “front” to pass DBE work through to non-DBE concerns, should serve as a warning that small government contractors can face penalties much more severe than a successful SBA size protest for serving as “pass-throughs” to other businesses.

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Lack of Detail on Subs’ Pricing Leads to Lost Contract

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Small government contractors competing on set-asides are in a unique position.  Unlike in the commercial world (and on unrestricted government contracts), small primes in the set-aside arena routinely subcontract to larger and more powerful companies.  Sometimes these large subcontractors aren’t used to being in a secondary role, and can make life difficult for their smaller primes.

Case in point: subcontractors sometimes balk at providing small government prime contractors with their direct labor, fringe benefit, General and Administrative, or other pricing information, preferring to simply offer a fixed-price lump sum.  Even when the government is uninterested in such details, having a full breakdown can help ensure compliance with the FAR’s subcontracting limits.  But as one prime contractor found out, when the government wants a pricing breakdown, failing to include a subcontractor’s information can be fatal.

One small contractor recently learned this lesson the hard way.

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Army Rejects Large Prime’s Proposal For Failing to Commit to Small Business Subcontracting

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For small government subcontractors, here’s some good news from the U.S. Army.  In a recent GAO bid protest decision, the Army eliminated a proposal from consideration because the prime contractor appeared to ignore the small business subcontracting requirement—and the GAO denied the prime’s GAO bid protest.

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Large Contractor Downgraded for Inadequate Subcontracting Plan

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Many contractors, large and small, will tell you that the government is taking its small business obligations seriously these days.  The renewed emphasis on small business can be seen not only at the prime contracting level, where we are finally getting close to the 23% government-wide goal, but also at the subcontracting level.

Contracting agencies are closely scrutinizing large businesses’ subcontracting plans for small and disadvantaged businesses.  Case in point: the agency evaluation in L-3 STRATIS, B-404865 (June 8, 2011).

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