Reminder: Large Primes Must Assign NAICS Codes To Subcontracts

The FAR Council recently proposed amendments to Part 19 regarding large prime contractors’ subcontracting plans.  The amendments require, among other things, that a large prime include in its subcontracting plan the “NAICS code and corresponding size standard of each subcontract” that it will award to a small business.

The proposed FAR amendment assumes that large prime contractors are assigning NAICS codes to their subcontracts, and with good reason–the SBA’s regulations require it.  In my experience, however, many large primes are not doing so.

In July 2013, the SBA adopted a final rule implementing certain portions of the Small Business Jobs Act of 2010.  That rule revised the SBA’s regulation at 13 C.F.R. 125.3, which contains a lengthy list of “responsibilities of prime contractors” (both large and small) at 13 C.F.R. 125.3(b) and a separate list of “additional responsibilities of large prime contractors” at 13 C.F.R. 125.3(c).

Prime contractors–large and small alike–would be well-served to read the entire regulation and ensure that their subcontracting policies fully comply.  With respect to NAICS codes, the rule for large prime contractors is straightforward: “[t]he contractor must assign each subcontract the NAICS code and corresponding size standard that best describes the principal purpose of the subcontract.”

There are no “ifs” “ands” or “buts.”  A large prime contractor is responsible for assigning a NAICS code and size standard to each subcontract.  However, many large prime contractors are not doing so.  Many primes and subs alike incorrectly assume that the NAICS code and size standard flow down from the prime contract to the subcontract.  In fact, as I wrote some time ago, when it comes to NAICS codes and size standards for subcontracts, the prime decides.

Large primes, consider yourselves reminded.

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