The Small Business Administration is readying a new final rule intended to make sure prime contractors take their subcontracting plans seriously by authorizing – but not requiring – contracting officers to use goals in primes’ subcontracting plans or their past performance in meeting these goals as source selection factors in placing orders with the government.  The current rules require that large businesses awarded a federal prime contract in excess of $500,000 - $1 million for construction contracts – submit a subcontracting plan to the contracting agency.  The rules require that the subcontracting plan include both dollar and percentage goals that reflect the “maximum practicable” utilization of small businesses as subcontractors or suppliers and that a prime contractor who fails to make a good-faith effort to achieve their subcontracting goals are subject to assertion of material breach of contract and can be terminated for default or assessed liquidated damages.  However, the small business community does not see the current scheme as effective as it could be because the goals are difficult to enforce so the incentive of having the subcontract plans be the basis for source selection should encourage primes to take their subcontracting plans seriously.

The proposed rule also contains procedures for conducting on-site compliance reviews and follow up reviews to see how well the prime contractors follow through on their plans.  The rule would also increase, from $10,000 to $100,000, the dollar threshold above which primes must notify unsuccessful offerors – the higher amount is intended to conform to the simplified acquisition threshold.

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