Subcontracting on Small Business Set-Asides
Practical Advice on GSA Schedule Contracting
By: Carolyn Alston, General Counsel, Washington Management Group
In recent months the Small Business Administration (SBA) suspended several companies from federal government contracting for misrepresenting their size status in order to obtain contracts that were set aside for small business.
As a result of these cases, we have received several questions regarding how much work a small business can subcontract and still qualify to participate in an acquisition that has been set aside for small business.
According to the Limitation on Subcontracting clause, the small-business prime contractor must perform at least 50% of the cost of performance on a service contract and 50% of the cost of manufacturing on a supply contract (not including the cost of materials). See FAR 19.508(e). If the contractor is not the manufacturer of the items offered, the contractor must furnish the product of a small business manufacturer unless SBA grants a waiver or exception. See FAR 19.502-2.
What does this mean for the GSA Multiple Award Schedule? When GSA establishes a Schedule it determines whether one or more SINs under a particular schedule can be set aside for small business. Where a SIN is set aside for small business the rules articulated above apply. GSA will include the Limitation on Subcontracting clause in the contract.
Keep in mind, however, that Part 19 of the Federal Acquisition Regulation (FAR) Small Business Programs does not apply to orders placed against GSA Schedules. See FAR 8.404(a). Agencies can give preference to small businesses and take credit for placing orders with small businesses, as long as the business meets the applicable size standards. The Limitation on Subcontracting clause and the requirement to furnish the product of a small manufacturer will not apply unless specifically added at the task order level.
Note that this is an area where the language that an agency uses to describe its procurement actions may be unclear. If an agency incorrectly uses the term "small business set-aside" to describe a preference for small businesses on the GSA Schedule, a decision making authority such as the Government Accountability Office (GAO) or SBA may indeed decide to apply the requirements of the mandatory small business programs.
Do you have a government contracting question? Please email it to me at CarolynsCorner@washmg.com.
Carolyn Alston is General Counsel of Washington Management Group. She provides legal counsel to WMG's federal acquisition consulting operation, focusing on Multiple Award Schedule contract award, compliance, and audit procedures.
Prior to joining WMG, Carolyn had a distinguished career with the U.S. General Services Administration. Her experience as a senior attorney in the GSA's Office of General Counsel led to her role as the lead in developing and writing GSA's Multiple Award Schedule policy. Her GSA career culminated in running the agency's successful GSA Schedule program as Assistant Commissioner for Acquisition at GSA.
Carolyn holds a BA from Cornell University and a JD from Georgetown Law Center. Carolyn is a member of the bar in Maryland and the District of Columbia.
WMG offers the information provided on this web site for informational purposes only.
WMG is a well recognized expert in GSA Schedule contracting, with more than 30 years of corporate experience. The information provided on this site is based on our substantial acquisition expertise, particularly with respect to commercial item contracting. Nothing on this site should be interpreted as legal advice.
As you recognize, most decisions regarding your GSA Schedule contract are highly dependent upon the facts of your particular circumstances. You should not rely on this site to make specific decisions about your contract. If you are considering taking specific actions on a matter affecting your GSA Schedule contract, we highly recommend that you contact WMG regarding a proposal for individual acquisition consulting services or that you seek advice from legal counsel with expertise in GSA Schedule contracting.
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