Understanding Small Business Subcontracting Plans

1. “SBA 1st First Wednesday Virtual Learning 2016” Understanding Small Business Subcontracting Plans

2. Presenter: Stephanie Lewis Size Specialist & Commercial Market Representative U.S. Small Business Administration Office of Government Contracting (817) 684-5303 stephanie.lewis@sba.gov

3. Hosts: • Dwight A. Johnson, Procurement Center Representative SBA Office of Government Contracting, Area IV, Omaha sbalearning@sba.gov (402) 221-7206 • Jan Kaiser, Procurement Center Representative • SBA Office of Government Contracting, Area IV, Chicago janis.kaiser@sba.gov (312) 353-7442

4. SBA Government Contracting Area Directors, Office of Government Contracting(https://www.sba.gov/content/pcr-area-directors) Size protests FAR Part 19.3 SBA staff FAR Part 19.4 Certificates of Competency FAR Part 19.6 Subcontracting plans FAR Part 19.7 Reminders: SBA approves joint ventures of 8(a) firms only. Do not ask any other small business JVs for evidence of SBA approval. See the full lists of the 2016 6-digit NAICS codes designated for EDWOSB and for WOSB set-asides under the WOSB Program at https://www.sba.gov/contracting/government-contracting-programs/women-owned-small-businesses.

5. Welcome to “SBA Virtual Learning 2016” • Questions answered during the final 10 minutes. • Technical problems? Contact the moderator with a note or call AT&T Connect Support at 1-888-796-6118. • Page numbers stated for those working of hard copies of the program. • We cover the “SBA Quick Reference” as time allows. • Find your nearest Procurement Technical Assistance Center at http://www.aptac-us.org

6. Association of Procurement Technical Assistance Centers posts past “First Wednesday” programing • Check this link for past programs: • http://www.aptac-us.org/for-contracting-officers-sba-webinar-library/ • Contracting officer resources: “How PTACs partner with federal agencies”: • http://www.aptac-us.org/federal-partners/

7. CAUTION – Do not recommend fee for service firms for SAM registration There are firms that offer fee for services to assist small businesses in a variety of ways. Registration in SAM, proposal preparations, certifications (not authorized by SBA) assistance in getting on GSA Federal Supply Schedules and so forth. No government official should be promoting any individual business’ services or products as this implies endorsement of one firm over all others. The government has to remain impartial.  If you come across something that you think is great, encourage that firm to market itself, but do not market on their behalf.  The government, through the Department of Defense established the Procurement Technical Assistance Program (PTAP) who have centers throughout the country that do provide this and many other services – most of which are at no cost to a firm.”  

8. 1102 FIRST WEDNESDAY VIRTUAL LEARNING SERIES 2016”9:30 to 10:30 Central Time To be rescheduled

9. One Continuous Learning Point • Self-service: Fill in your name on the certificate slide and save. • Phoning in only? Send an email immediately to the link at sbalearning@sba.govto verify your participation. If you listen in groups, send emails of participants in an excel document. • Post program email. This contains a time sensitive .wmv recording, a transcript of the program, along with another copy of the program PowerPoint.

10. Importance of the Subcontracting Program • In FY14, SBs received $91.7 billion in prime contracts (roughly 25% of $366.8 billion) and $75.0 billion in subcontracts (33.0% of $227.0 billion). • Maximizes small business participation at all performance tiers • Increasing importance on agency SCORECARD • Final Rule issued July 14, 2016 “Small Business Subcontracting Improvements” effective Nov 1, 2016.

11. Subcontracting Plans • FAR 52.219-8 (over SAT) Utilization of Small Business Concerns • FAR 52.219-9 (“Other than Small”) Small Business Subcontracting Plan • Contract or modification over $700,000 ($1.5 million for construction) • “Maximum Practicable Opportunity” • “Good Faith Effort”

13. Maximum Practicable Opportunity • Breaking out contract work items into economically feasible units, as appropriate, to facilitate small business participation; • Conducting market research to identify small business subcontractors and suppliers through all reasonable means, such as performing online searches via SAM, posting opportunities on SBA's SUB-Net, participating in Business Matchmaking events, and attending pre-bid conferences; • Soliciting small business concerns as early in the acquisition process as practicable to allow them sufficient time to submit a timely offer for the subcontract; • Providing interested small businesses with adequate and timely informationabout the plans, specifications, and requirements for performance of the prime contract to assist them in submitting a timely offer for the subcontract; • Assisting interested small businesses in obtaining bonding, lines of credit, required insurance, necessary equipment, supplies, materials, or services; • Utilizing the available services of small business associations; local, state, and Federal small business assistance offices; and other organizations; and • Participating in a formal mentor-protégé program with one or more small-business protégés that results in developmental assistance to the protégés.

14. Subcontracting Plan Not Required • Small Businesses • No Subcontracting Opportunities Exist • Approved one level above the CO, placed in contract file • Performed Exclusively Outside the United States

15. Subcontract • Any agreement (other than one involving an employer-employee relationship) entered into by a Government prime contractor or subcontractor calling for supplies and/or services required for performance of the contract or subcontract (including modifications). • First Tier Only

16. Types of Subcontracting plans A goal without a plan is just a wish. Antoine de Saint-Exupery

17. Individual Subcontracting Plan • Plan for a specific contract • 1 contract = 1 plan • Covers entire contract period, including separate goals for each option period • Contains required plan elements • Choose whether or not to include indirect costs incurred for common or joint purposes (allocated on a prorated basis) • ISR is used to determine whether goals are met

18. Master Plan • Plant or division wide basis • Boiler plate plan • Effective for 3 years after approved • Goals negotiated for each contract (and rationale) • Master plan + goals are married and become an individual plan effective for the life of the contract • ISR is used to determine whether goals are met

19. Commercial Subcontracting Plan • Preferred type for “commercial items” (FAR 2.101) • Annual plan based on Contractor’s fiscal year • Applies to the entire production of commercial items on a corporate, plant, division, or product line basis • Covers all subcontracting (govt. and commercial) • Contains required elements (FAR 19.704) • Plan and SSR include indirect costs • SSR used to determine whether goals are met • Remains in effect during the contractor's fiscal year for all Federal government contracts in effect during that period 19

20. Commercial Plans • Once a contractor’s commercial plan has been approved, the Government shall not require another subcontracting plan from the same contractor while the plan remains in effect • As long as providing a commercial item.

21. Comprehensive Subcontracting Plan (DoD contracts only) • DoD Test Program, DFARS 219.702 • Annual plan for all DOD subcontracting • Government fiscal year • Corporate, plant, or division basis • DCMA administers program • Contains required elements (FAR 19.704) • Has additional elements • Submit SSR annually (used to determine whether goals are met)

22. Rules • A contract may have no more than one subcontracting plan • CO’s discretion, require a plan if the contractor’s size changes from SB to LB at time of recertification

23. How are plans reviewed? • Individual & Master Plans • Contracting Officer • Commercial Subcontracting Plans • First Approval – CO for first federal contract • Subsequent Annual Approvals - CO responsible for the uncompleted contract with the latest completion date. • Contractor provides a copy of the approved plan to each CO responsible for an ongoing contract that is subject to the plan • DoD Comprehensive Subcontracting Plans • Negotiate with DCMA annually

24. Goals • Established as total dollars subcontracted and as a percentage of total subcontract dollars. SB SDB WOSB HUBZONE VOSB SDVOSB • A CO may also establish goals as a percentage of total contract dollars • Option years broken out separately

25. Size • Prime contractor decides the appropriate NAICS code/size standard • Describes the principal purpose of the subcontract • Puts it on the subcontract

26. Who can a prime count? • Primes must collect written size certifications from subcontractors, or use SAM • Goal Categories • Small Business – self-certifying • SDB – self-certifying • WOSB – self-certifying • HUBZone – SBA certified • VOSB – self-certifying • SDVOSB – self-certifying * ANCs and Indian Tribes are counted as SB & SDB * NIB/NISH counted toward SB (DoD Only)

27. Excluded from subcontracting • Internally generated costs, such as salaries and wages • Employee insurance; other employee benefits • Payments for petty cash • Depreciation, interest • Income taxes, property taxes • Lease payments, • Bank fees, fines, claims, and dues • Original Equipment Manufacturer relationships during warranty periods (negotiated up front with product) • Utilities such as electricity, water, sewer, and other services purchased from a municipality or solely authorized by the municipality to provide those services in a particular geographical region • Philanthropic contributions

28. TEST YOURSELF: • Total subcontracting $100,000 • Small Business $30,000 30% • SDB $ 8,000 26.7% • 8a $ 3,000 10% • WOSB $ 0 0% • EDWOSB $ 1,500 5% • Foreign $ 9,000 30% • HUBZone $ 3,500 11.7% • VOSB $ 2,000 6.7% • SDV $ 3,000 10%

29. CORRECT METHOD • Total subcontracting $100,000 100% • Small Business $30,000 30% • SDB $ 11,000 11% • WOSB$ 1,5001.5% • HUBZone$ 3,500 3.5% • VOSB$ 5,000 5% • SDV $ 3,000 3% 29

30. Are goals acceptable? • Minimum goals/floors • Statutory goals • Agency subcontracting goals • Realistic goals • How do we know what realistic goals are?

31. GOALS • REASONABLE LEVEL • expend good faith efforts to the maximum practicable extent • SHOULDN’T LOW BALL GOALS • To minimize exposure to liquidated damages • To avoid the administrative burden of substantiating good faith efforts. • SHOULDN’T NEGOTIATE UPWARD • If a higher goal will significantly increase the Government’s cost or seriously impede the attainment of acquisition objectives.

32. GOALS • No detailed standards apply to every subcontracting plan. • Goals should be attainable • Consider circumstances: • Previous involvement of SBs in similar acquisitions • Availability of SBs in socio-economic groups • Contractor’s own past performance • Reasonableness of the goals • Methods the contractor intends to use to meet the goals

33. Mandatory Plan Elements • A subcontracting plan must include: • Goals based on total planned subcontracting dollars expressed as a % • Options expressed separately • Optional (indivplans only): ALSO as % of total contract value • Total dollars to be subcontracted • Types of supplies/services to be subcontracted • Method used to develop goals • Method used to identify potential SBs • Indirect costs included/not included FAR 19.704

34. Mandatory Plan Elements • Name of individual administering the plan • Efforts to ensure SB have equitable opportunity to compete • Assurances that required clauses and provisions will flow down to subcontractors • Assurances that reporting will be done • Recordkeeping procedures FAR 19.704

35. PCR Advisory Recommendations • PCRs review the solicitation and the subcontracting plan • Submit advisory recommendations

36. REPORTING

37. Post Award Responsibility of CO FAR 19.705-6 (proposed rule) • Assess whether the prime contractor made a good faith effort to comply with its SB Subcontracting Plan • Assess the prime contractor’s written explanation concerning the prime contractor’s failure to use a small business concern in the performance of the contract in the same scope, amount, and quality used in preparing and submitting the bid/proposal

38. ISR and SSRs • www.esrs.gov • ISR: • Semi annual (March 31 and Sept 30) • 30 days after reporting period • 30 days after contract completed (FINAL) • Due even if no subcontracting has occurred • Option Year Goals: rolled in as options are exercised • SSR: • Annual (end Sept 30) • 30 days after reporting period

39. ISR Reporting • www.esrs.gov • CMRs have superuseraccess • Approved by: Contracting Officers or higher tier prime contractor • Accept or Reject within 60 days • Reject – • errors, omissions, or incomplete data • provide explanation to contractor • Review Goals and Remarks 39

40. SSR Reporting Commercial Plans: • Approved by CO who approved the commercial plan • One SSR - includes % of dollars attributable to each agency Individual Plans • Approved ByAgency Representative • Separate report to each agency covering only that agency’s contracts (that has a subcontracting plan) Content: • All subcontracting under prime contracts and subcontracts with the awarding agency, regardless of the dollar value of the subcontracts. • May be submitted on a corporate, company or subdivision • For DoD a consolidated report shall be submitted (except for construction, a separate report shall be submitted for each DoD component)

41. POST AWARD MONITORING

42. Post Award Monitoring • SBA • Subcontracting Orientation and Assistance Review (SOAR) • Performance Review (Desk Review) • Program Compliance Review • Follow-up Review • DCMA (MOU) • Program Compliance Review • Agency Reviews • Surveillance Review

43. SBA reviews • Exceptional • Very Good • Satisfactory • Marginal • Corrective Action Plan • Unsatisfactory • Cannot substantiate its claimed achievements • Corrective Action Plan LIQUIDATED DAMAGES • considered by CO • upon written recommendation from CMR • willful or intentional failure to perform in accordance with the requirements of the subcontracting plan or willful/intentional action to frustrate the plan.

44. Orders under IDIQ contracts (task or delivery order contracts, GWACs, MACs, and FSS) • Agency funding the order “may” establish SB subcontracting goals for individual orders, BPAs or BOAs. • Submit SB subcontracting reports for individual orders to the CO on an annual basis. • Agency funding the order shall receive credit towards its SB subcontracting goals. • More than one agency may not receive credit towards its subcontracting goals for a particular subcontract.

45. Credit for Lower Tier Subcontracting • Implements NDAA of 2014 • In individual subcontracting plans, the contractor may receive credit for small business concerns performing as first tier subcontractors or subcontractors at any lower tier • Proposed Rule 80 FR 60300 (10/06/15), Comment period closed 12/07/2015 • Draft Final Rule in review

46. Credit for Lower Tier Subcontracting • Prime contractors must incorporate the subcontracting plan goals of their lower tier OTSB subcontractors in their individual subcontracting plans. • Lower tier OTSB subcontractors must have their own individual subcontracting plans if the subcontract is at or above the subcontracting plan threshold, and are required to meet their subcontracting plan goals.

47. Credit for Lower Tier Subcontracting • The actual subcontracting dollars are only reported once for the same award to avoid double counting the dollars, notwithstanding the fact that a small business subcontract may be reported under more than one subcontracting plan.

48. ”SBA Quick Reference: Whom to Contact for What in SBA Government Contracting”

49. Dynamic Small Business Search

50. Summary of CFR regulations • SBA size regulations 13 CFR Part 121 • HUBZone regulations 13 CFR 126.616 • SBA Certificate of Competency 13 CFR 125.5 • Service-disabled veteran 13 CFR 125.15(b) • 8(a) and SDB regulations 13 CFR 124.513 • Small disadvantaged business 13 CFR 124.1002(f) • WOSB Program 13 CFR 127 • SBA Prime Contracting 13 CFR 125.2 • SBA Subcontracting 13 CFR 125.3