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SBA Issues Proposed Rule to Allow Lower Tier Small Business Subcontractors to Qualify Toward Small Business Subcontracting Goals

On October 6th, 2015 the Small Business Administration (“SBA”) issued a proposed rule to allow “other than small” business prime contractors, with small business subcontracting plans, to receive credit for awarding subcontracts to small businesses at any tier level. Under the current regulations, credit toward small business subcontracting goals is awarded only at the first tier level. The proposed rule seeks to further the government’s overall commitment to providing Federal procurement opportunities to small business.

Federal Acquisition Regulation (“FAR”) 52.219-9(l), which provides regulations governing small business subcontracting plans, states the “subcontract award data reported by prime Contractors and subcontractors shall be limited to awards made to their immediate next-tier subcontractors. Credit cannot be taken for awards made to lower tier subcontractors unless the Contractor or subcontractor has been designated to receive a small business or small disadvantaged business credit from an Alaska Native Corporation or Indian tribe.” The current regulations, while well intentioned, fail to provide recognition for awards made to lower tier small business subcontractors, and small business subcontracts awarded by a large first tier subcontractor.

While the inclusion of lower tier subcontractors is expected to be welcomed by the industry, the SBA also included potentially problematic rule change which seeks to require that large prime contractors state applicable North American Industry Classification System (“NAICS”) size standards in solicitations for small business subcontracts.

For additional assistance related to SBA regulations please contact Cherry Bekaert’s Government Contractor Services Group.

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