[Federal Register: April 2, 1999 (Volume 64, Number 63)]
[Notices]
[Page 16001-16003]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap99-78]
=======================================================================
-----------------------------------------------------------------------
OFFICE OF MANAGEMENT AND BUDGET
Office of Federal Procurement Policy
Policy Letter 99-X on Promoting Subcontracting Opportunities and
Administering Subcontracting Plans
AGENCY: Executive Office of the President, Office of Management and
Budget (OMB), Office of Federal Procurement Policy (OFPP).
ACTION: OFPP is requesting comments on a policy letter supplementing
the Federal Acquisition Regulation (FAR) to further promote
subcontracting opportunities for small, small disadvantaged, and women-
owned small business concerns.
-----------------------------------------------------------------------
SUMMARY: This policy letter supersedes and cancels OFPP Policy Letters
80-1, 80-2, and 80-4. It supplements FAR coverage of subcontracting
opportunities for small, small disadvantaged, and women-owned small
business concerns. The current trend toward contract consolidation may
impact these small business concerns' ability to compete as prime
contractors. We are issuing this policy letter to enhance
subcontracting opportunities for such concerns.
COMMENT DATE: Comments must be received on or before June 1, 1999.
ADDRESSES: Please submit comments to Deidre A. Lee, Administrator,
Office of Federal Procurement Policy, Old Executive Office Building,
Room 352, Washington, DC 20503.
FOR FURTHER INFORMATION CONTACT: Linda Williams at 202-395-3302.
Deidre A. Lee,
Administrator.
Policy Letter 99-X to the Heads of Executive Departments and
Establishments
Subject: Policy on Promoting Subcontracting Opportunities and
Administering Subcontracting Plans
1. Purpose. This directive supplements Federal Acquisition
Regulation (FAR) coverage of subcontracting plans required by
section 8(d) of the Small Business Act (15 U.S.C. 637(d)) as amended
by the Federal Acquisition Streamlining Act of 1994 (FASA).
2. Supersession Information. This Policy Letter supersedes and
cancels OFPP Policy Letter 80-1, ``P.L. 95-507, Section 211,
Subcontracting: Agency Coordination with the Small Business
Administration Resident Procurement Center Representatives,'' dated
January 24, 1980; OFPP Policy Letter 80-2, ``Regulatory Guidance on
Section 211 of Public Law 95-507,'' dated April 29, 1980; Supplement
No. 1 to Policy Letter 80-2, dated May 29, 1981; and OFPP Policy
Letter 80-4, ``Women's Business Enterprise Program,'' dated April
29, 1980.
3. Authority. This Policy Letter is issued pursuant to section 6
of the Office of Federal Procurement Policy Act, as amended, 41
U.S.C. 405.
4. Definitions.
a. The definitions of commercial plan, failure to make a good
faith effort to comply with the subcontracting plan, individual
contract plan, master plan, small business concern, small business
subcontractor, small disadvantaged business concern, and women-owned
small business concern have the same meaning as that provided by FAR
Part 19.
b. The term commercial item has the same meaning as that
provided by FAR section 2.101.
c. The term subcontract has the same meaning as that provided by
FAR section 19.701. However, purchases from a corporation, company
or division of a prime contractor that are affiliates as defined in
13 C.F.R. 121.103 are not considered ``subcontracts.''
5. Policy. This document establishes policies for promoting
subcontracting opportunities and administering subcontracting plans
for small business, small disadvantaged business, and women-owned
small business concerns. Nothing in this Policy Letter precludes an
agency from establishing additional requirements regarding
subcontracting plans.
6. Solicitation and Subcontracting Plan Requirements.
a. Determining the Need for a Subcontracting Plan. In addition
to the requirements contained at FAR section 19.705-2, the
solicitation shall inform prospective offerors that the estimated
value of indefinite delivery contracts/task order and delivery order
contracts will be used to determine if a subcontracting plan is
required.
b. Reviewing the Subcontracting Plan. In addition to the
procedures contained at FAR section 19.705-4, contracting officers
shall take the following actions:
(1) Require an offeror that proposes lower goals than the target
goals stated in the solicitation to explain why it cannot achieve
the stated goals.
(2) Advise offerors of the availability of the following sources
of information on potential small, small disadvantaged, and women-
owned small business concern subcontractors:
(a) The U.S. Small Business Administration (SBA) Procurement
Marketing and Access Network (PRONet) ( http://pro-net.sba.gov/), a
free on-line internet-based search engine that provides access to
the profiles of more than 170,000 small businesses.
(b) The Department of Commerce, Minority Business Development
Agency's (MBDA) Phoenix Data Base or the Opportunity Data Base at
www.mbda.gov.
[[Page 16002]]
(c) State, county, and city government minority business
offices.
(d) Small, minority, and women business associations.
(e) Local chambers of commerce.
(f) DOD's Centralized Contractor Registration Data Base.
(3) Encourage offerors to synopsize in the Commerce Business
Daily (CBD) or advertise in trade newspapers, journals, or other
communication media.
(4) Require offerors to identify other contracts that had
subcontracting plans. Contact the contracting officers who
administered those earlier plans to determine whether the objectives
were realized and required reports were submitted on time. Overall
compliance should be considered, not merely whether the goals were
met.
(5) Ensure that subcontracting master plans meet the following
conditions:
(a) The SBA procurement center representative has been given an
opportunity to comment on the master plan and,
(b) The subcontract goals for small, small disadvantaged, and
women-owned small business concerns are specifically set forth in
each contract or modification.
(6) Follow the requirements of FAR clause 52.219.9 entitled
``Small, Small Disadvantaged and Women-Owned Small Business
Subcontracting Plan'' if the award is expected to exceed $500,000
($1 million for construction of a public facility), unless the
acquisition is reserved for small business concerns, no
subcontracting opportunities exist, the contract will be performed
entirely outside of any state, territory, or possession of the
United States, the District of Columbia, and the Commonwealth of
Puerto Rico, or the contract is with Federal Prison Industries or
the blind or severely disabled and is awarded under the provisions
of the Javits-Wagner-O'Day Act. The clause shall apply to all other
entities including large businesses; state and local governments;
non-profit organizations; public utilities; educational
institutions, including Historically Black Colleges and Universities
(HBCUs), Minority Institutions (MIs), and foreign-owned firms that
receive federal contracts if the portion of the contract to be
performed in the United States exceeds the above thresholds.
However, subcontracting plans are not required from HBCUs and MIs
that receive contract awards above the thresholds from the
Department of Defense (DOD), the Coast Guard, and the National
Aeronautics and Space Administration (NASA).
(7) Ensure that small disadvantaged and women-owned small
business concern dollars are included in the small business
category. This means, for example, that a small disadvantaged
business concern owned by a woman is counted as a small business
concern, a small disadvantaged business concern, and a women-owned
small business concern.
(8) Ensure that the actual achievements on the SF 294,
Subcontracting Report for Individual Contracts, are reported on the
same basis as the goals set forth in the contract.
(9) When subcontractors are required to adopt subcontracting
plans (see FAR section 19.704(a)(9)), require offerors to review,
approve, and monitor their subcontractors' compliance with such
plans. Copies of subcontractors' plans must be retained by the prime
contractor until subcontract completion. A ``certificate of
compliance'' or statement from the subcontractor that it has a
subcontracting plan does not satisfy this requirement.
c. Award of Contracts or Contract Modifications.
(1) The Small Business Act treats contracts and modifications
separately. The following policies apply to contract modifications
other than options. If a subcontracting plan is not required at the
time of award because the contract value is below the threshold, a
subcontracting plan will not be required even if a subsequent
modification increases the contract value to an amount exceeding the
threshold. The only exception to this rule is when the contract
modification itself exceeds the threshold. Moreover, it is not
necessary to obtain another subcontracting plan for a modification
exceeding the applicable threshold if the contract already includes
a subcontracting plan. However, the original plan must be modified
to adjust the goals to account for the new effort.
(2) The following policies apply to contractors and
subcontractors that no longer meet the size or ownership criteria
for a small, small disadvantaged, or women-owned small business
concern as a result of growth, a buy-out, or a merger during the
period of contract performance:
(a) A subcontracting plan is not required of any former small
business prime contractor that, during contract performance, no
longer meets the definition of a small business concern. Similarly,
the requirement to submit periodic reports does not apply. However,
a subcontracting plan is required if a prime contractor erroneously
considered itself small at the time of contract award. Under this
circumstance, the contracting officer should request a
subcontracting plan from the contractor and the responsibility to
submit periodic reports applies.
(b) A prime contractor may continue to report subcontract
dollars as a small, small disadvantaged, or women-owned small
business concern award for the duration of the subcontract,
including all option years.
d. Contract Awards Involving Commercial Plans.
(1) Commercial plans, as described in FAR section 19.704(d), are
useful for companies that normally rely on their existing network of
suppliers for all of their business and do not enter into specific
subcontracts to fill Government contracts. Commercial plans may
apply to the production of the offeror's entire company, or may be
limited to a corporation, company, division, plant or product line.
(2) Commercial plans are recognized as one way to reduce the
burden of government-unique requirements for companies that provide
commercial items under Government contracts and subcontracts.
(3) Agencies shall inform prospective offerors in solicitations
expected to trigger the requirements for a subcontracting plan of
the opportunity for them and/or their subcontractors to develop
commercial plans if they are supplying commercial items.
(4) Offerors shall state if there is a pre-approved plan and for
which item(s) and/or service(s) the plan has been approved.
(5) The contracting officer shall obtain a copy of the plan and
approval document from a contractor who has a commercial plan
previously approved by another agency's contracting activity or
another federal agency.
e. Contract Administration of Subcontracting Plans. In addition
to the requirements at FAR section 19.706, administrative
contracting officers shall:
(1) Monitor a contractor's compliance with the SF 294 report
requirements. The SF 294 is used to evaluate the contractor's
progress toward meeting the subcontracting goals established in an
individual contract plan. The contracting officer shall pay
particular attention to reviewing the SF 294 required at contract
completion. The SF 294 is not required for contracts with an
approved commercial plan.
(2) Ensure receipt of and review the SF 295 (Summary
Subcontracting Report). The SF 295 is used to evaluate the
contractor's progress toward meeting the subcontracting goals in
commercial plans. The SF 295 also is used for both commercial plans
and individual plans to summarize all subcontract awards under
contracts with a particular federal agency.
7. Best Practices. For purposes of this Policy Letter, best
practices are practical techniques gained from experience that
agencies may use to improve subcontracting plans. The best practices
are not mandatory and should not form the basis for Inspector
General or other audit reviews.
a. Subcontract Plan Evaluation.
(1) DOD, Coast Guard, and NASA regulations require that the
subcontracting plan be a factor in evaluating bids or competitive
proposals (10 U.S.C. 2323(h)(2)) under solicitations that require a
plan. Other agencies may use this approach as appropriate. For
example, the offeror's subcontracting plan may be a separate factor/
subfactor in complex, large dollar negotiated acquisitions, or
consolidated procurements, where substantial subcontracting
opportunities exist. As a separate evaluation factor/subfactor
(apart from the offeror's technical, management, and cost proposal),
the subcontracting plan should account for a meaningful percentage
or weight of the total evaluation. In cases where small businesses
are bidding against large contractors and small businesses are not
required to have a plan, contracting officers shall give small
businesses a rating equal to the maximum points available for those
evaluation factors/subfactors.
(2) Agencies should define the parameters by which a
subcontracting plan will be evaluated. The parameters may include
the following:
(a) The extent to which the plan expresses definitive
commitments to subcontracting with small, small disadvantaged, and
women-owned small business concerns. Greater credit may be given to
an offeror who identifies the names of the intended small, small
disadvantaged, and women-owned small business concerns with the
initial submission of its plan, and/or provides
[[Page 16003]]
``letters of commitment'' to subcontract with such firms.
(b) The extent to which the plan provides a significant share of
subcontracting dollars to small, small disadvantaged, and women-
owned small business concerns.
(c) The quality of the offeror's overall plan, including its
goals and methods for achieving those goals.
(d) For individual contract plans, the offeror's procedures for
reviewing, approving, and monitoring its subcontractors' compliance
with subcontracting plans.
(e) The extent to which the offeror utilizes small business
incumbents with proven performance records as subcontractors under
consolidated contracts for services. Utilizing incumbents allows the
government to retain institutional knowledge, and small businesses
to continue providing quality services at advantageous prices.
(f) For mission-specific contracts such as high technology and
research, the extent to which the offeror plans to award
subcontracts for other than routine support services.
(g) The extent to which prime contractors have excelled in
achieving subcontracting goals or participated in a Mentor Protege
Program.
b. Use of Past Performance in Source Selection.
(1) The contracting officer may obtain information from the
cognizant contract administration office concerning an offeror's
past performance with respect to subcontracting with small, small
disadvantaged, and women-owned small business concerns. In addition,
the contracting officer may seek the advice of the agency's small
business representative and/or check with the SBA Area Director for
Government Contracting or the Defense Contract Management Command to
determine the offeror's current subcontracting performance rating.
(2) In evaluating past performance, the contracting officer may
consider the following:
(a) The extent to which goals were achieved on contracts
completed during the current fiscal year and the two previous fiscal
years, with greater weight assigned to those contracts completed
most recently.
(b) The extent to which the offeror's subcontracting efforts
were consistent with its subcontracting plan or the extent to which
the offeror made a good faith effort to comply with its plan.
(c) The extent to which the offeror required its large business
subcontractors to adopt similar plans under the contract flow-down
requirement.
(d) The extent to which an offeror complied with the timely and
accurate submission of the required SF 294 and SF 295.
(e) The extent to which the offeror participates in a Mentor
Protege Program.
c. Awards and Incentives.
(1) Contracting activities, in conjunction with Heads of Offices
of Small and Disadvantaged Business Utilization, may establish an
awards program for contracting officials and prime contractors who
do an outstanding job of promoting small, small disadvantaged, and
women-owned small business concerns as subcontractors. Recognition
may be in the form of plaques, certificates, monetary awards, etc.
The awards program may, among other things, recognize:
(a) Prime contractors that exceed all of their subcontracting
goals;
(b) Contracting officials who are exemplary in administering and
enforcing compliance with subcontracting plans, and
(c) Small business and contracting specialists who demonstrate
outstanding outreach efforts to promote the use of small, small
disadvantaged, and women-owned small business concerns as
subcontractors.
(2) In addition to an awards program, contracting activities may
consider incentives such as:
(a) In contracts containing the Liquidated Damages clause at FAR
section 52.219-16, requiring that a certain percentage of the
contract value be subcontracted to small business concerns. If the
percentage is not met, the contracting activity may assess
liquidated damages.
(b) Making the administration and enforcement of subcontracting
plans a critical factor in the contracting officer's performance
appraisal.
(c) Negotiating alternative payment schedules with prime
contractors that offer to provide substantial subcontracting
opportunities to small, small disadvantaged, and women-owned small
business concerns. This incentive also could be applied to prime
contractors that agree to mentor small business concerns under a
Mentor Protege Program.
(d) Reducing inspection, monitoring, and auditing of
subcontracting compliance for prime contractors that have an
outstanding past performance record. For example, a contractor that
receives an outstanding rating on a subcontracting compliance review
could receive a follow-up review the next year that consists of a
statistical desk audit only. The SBA has authorized its field office
staff to exempt outstanding contractors from a formal compliance
review for three years as long as the SF 295 shows no deterioration
in the dollars awarded to small, small disadvantaged, and women-
owned small business concerns during that period.
d. Goals.
(1) The contracting officer may use target goals in
solicitations to inform potential offerors of what the Government
expects in an acceptable subcontracting plan.
(2) The contracting officer may specify subcontracting
percentage goals to increase small, small disadvantaged, and women-
owned business concern participation in newly consolidated contracts
for non-commercial items/services. The percentages may be determined
on a contract-by-contract basis based on market research and
requests for information from potential offerors and potential small
business subcontractors.
(3) In addition to the statutory goals for small, small
disadvantaged, and women-owned small business concerns, which are
based on the projected value of the prime and subcontract awards
proposed by the offeror, the contracting officer may also establish
subcontracting goals based on the overall value of the procurement.
(Note: In some cases, this may not be a realistic approach. The
dollar value of the contract may have no effect on the potential for
subcontracting.)
(4) The contracting officer may consider increasing the small,
small disadvantaged, and women-owned small business concern
participation goals commensurate with the size of the contract. For
example, the larger the degree of contract aggregation, the higher
the goals for small, small disadvantaged and women-owned small
business concern participation may be set.
8. Responsibilities. The Federal Acquisition Regulatory Council
shall ensure that the policies established herein are incorporated
in the FAR within 210 days from the date this Policy Letter is
published in final form in the Federal Register. Promulgation of
final regulations within that 210-day period shall be considered
issuance in a ``timely manner'' as prescribed in 41 U.S.C. 405(b).
9. Information Contact. Questions regarding this Policy Letter
should be directed to Linda Williams, Deputy Associate
Administrator, Office of Federal Procurement Policy, 725 17th
Street, NW, Washington, DC 20503, telephone 202-395-3302, facsimile
202-395-5105.
10. Judicial Review. This Policy Letter only provides policy
guidance to agencies in the exercise of their discretion concerning
Federal contracting. It does not interpret the Constitution or any
law. It is not intended to create any legal right or any basis on
which to sue the United States or its representatives.
11. Effective Date. The Policy Letter is effective 30 days after
the date of issuance.
[FR Doc. 99-8122 Filed 4-1-99; 8:45 am]
BILLING CODE 3110-01-P