Understanding Small Business Subcontracting Plans SBA 1 st

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

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

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

SBA Government Contracting Area Directors, Office of Government Contracting (https: //www. sba. gov/content/pcr-area-directors) 1. 2. 3. 4. 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: 1. SBA approves joint ventures of 8(a) firms only. Do not ask any other small business JVs for evidence of SBA approval. 2. 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-contractingprograms/women-owned-small-businesses.

Welcome to “SBA Virtual Learning 2016” 1. Questions answered during the final 10 minutes. 2. Technical problems? Contact the moderator with a note or call AT&T Connect Support at 1 -888 -796 -6118 3. Page numbers stated for those working of hard copies of the program. 4. We cover the “SBA Quick Reference” as time allows. 5. Find your nearest Procurement Technical Assistance Center at http: //www. aptac-us. org

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

CAUTION – Do not recommend fee for service firms for SAM registration 1. 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. 2. 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. 3. 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. ”

1102 FIRST WEDNESDAY VIRTUAL LEARNING SERIES 2016” 9: 30 to 10: 30 Central Time FY 2016 1 2 3 Topic 8(a) Business October 7, 2015 Development Women-Owned Small November 4, 2015 Business SBA Surveillance December 2, 2015 Reviews 2016 Presenters Jackquline Robinson. Burnette SBA Area HDQTRS Ken Silvia III Valerie Coleman V 4 January 6, 2016 Jan Kaiser Consolidation/Bundling SDVOSB Keith Waye Strategic Sourcing Tom Krusemark Market Research: Dynamic Small Bus Valerie Coleman Search Mariana Pardo/Alison HUBZones Mueller 5 6 February 3, 2016 March 2, 2016 7 April 6, 2016 8 May 4, 2016 9 June 1, 2016 SBA Size Standards 10 July 13, 2016 Nonmanufacturer Rule Janice Nietes 11 August 3, 2016 Understanding SB Subcontracting Plans David Gordon To be reschedule d Stephanie Lewis IV I IV V HDQTRS IV VI V

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

Importance of the Subcontracting Program In FY 14, 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.

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”

Is a subcontracting plan required? Modification (MOD) (FAR 19. 702(a)(1) & (2)) Contractor is “Other Than For the Small Business” (OTSB) Contract? For the Modification? Contract>$700 K and MOD>$700 K Yes; however, it is not necessary to obtain another subcontracting plan for a modification exceeding the applicable threshold if the contract already includes a subcontracting plan. The original plan must be modified to adjust the goals to account for the new effort. FAR 19. 705 -2(e) Contract>$700 K and MOD<$700 K Yes No Contract<$700 K, MOD<$700 K, and C+M>$700 K No Contract<$700 K, MOD>$700 K No Yes, per 13 CFR 125. 3(d)(8) – & FAR proposed rule Yes

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 information about 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 smallbusiness protégés that results in developmental assistance to the protégés.

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

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

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

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

Master 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

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 19 Remains in effect during the contractor's fiscal

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.

Comprehensive Subcontracting Plan (Do. D contracts only) Do. D 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)

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

How are plans reviewed? Individual & Master Plans Commercial Subcontracting Plans Contracting Officer 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 Do. D Comprehensive Subcontracting Plans Negotiate with DCMA annually

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

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

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 (Do. D Only)

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

TEST YOURSELF: Total subcontracting Small Business SDB 26. 7% 8 a WOSB EDWOSB 5% Foreign HUBZone 11. 7% VOSB SDV $100, 000 $30, 000 30% $ 8, 000 $ 3, 000 10% $ 0 0% $ 1, 500 $ 9, 000 30% $ 3, 500 $ 2, 000 6. 7% $ 3, 000

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

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

GOALS REASONABLE LEVEL SHOULDN’T LOW BALL GOALS expend good faith efforts to the maximum practicable extent 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.

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

Mandatory Plan Elements A subcontracting plan must include: Goals based on total planned subcontracting dollars expressed as a % Options expressed separately Optional (indiv plans 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

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

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

REPORTING

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

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

ISR Reporting www. esrs. gov CMRs have superuser access 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

SSR Reporting Commercial Plans: Approved by CO who approved the commercial plan One SSR - includes % of dollars attributable to each agency Individual Plans Approved By Agency 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 Do. D a consolidated report shall be submitted (except for construction, a separate report shall be submitted for each Do. D component)

POST AWARD MONITORING

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

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.

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.

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

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.

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.

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

Dynamic Small Business Search

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

FIVE TYPES OF SBA CONTACTS & OFFICES A. SBA Government Contracting Area Offices B. SBA Procurement Center Representatives (PCRs) C. SBA Commercial Market Representatives (CMRs) D. SBA District Offices E. SBA Headquarters

Six SBA Government Contracting Areas at hyperlink: https: //www. sba. gov/content/pcr-directory

A. SBA Quick Reference - SBA Area Offices 1. Size protests (with recertification) FAR 19. 302 13 CFR 121. 1001 13 CFR 121. 1010 2. Locating nearest SBA staffer FAR 19. 4 3. Certificate of Competency FAR 19. 6 13 CFR 125. 5 4. COC Limitations on Subcontracting Compliance FAR 19. 601 13 CFR 125. 6(f) 5. Receiving copies subcontracting plans FAR 19. 705 -6

B. SBA Quick Reference SBA Procurement Center Representatives (PCRs) FAR 19. 402 Small Business Administration procurement center representatives. (a)(1) The SBA may assign one or more procurement center representatives to any contracting activity or contract administration office to carry out SBA policies and programs… (2) If a SBA procurement center representative is not assigned to the procuring activity or contract administration office, contact the SBA Office of Government Contracting Area Office…. . (b) Upon their request and subject to applicable acquisition and security regulations, contracting officers shall give SBA procurement center representatives…. access to all reasonably obtainable contract….

B. SBA Quick Reference SBA PCRs, cont. 1. SBA PCR coordination records 2. Small business set-aside appeals 3. HUBZone set-aside appeals 4. SDVOSB set-aside appeal 5. Reporting bundling to SBA (MATOCs) 6. SBA subcontracting plan reviews-copies 7. SBA subcontracting program review 8. Small business TFD 9. Surveillance review of agency contracting FAR 19. . 501(b) 13 CFR 125. 2 FAR 19. 505 13 CFR 125. 2(b)(7) FAR 19. 1305 FAR 19. 1306 13 CFR 126. 61 FAR 19. 1405 FAR 19. 1406 13 CFR 125. 22 FAR 19. 202 -1(e)(1) 13 CFR 125. 2 FAR 19. 705 -5(3) 13 CFR 125. 2(b)(6)(iii) FAR 19. 705 -6(c) 13 CFR 125. 2(b)(6)(iii)(C) FAR 19. 707(4) 13 CFR 125. 2(b)(6)(iii)(C) FAR 49. 402 -3 (e)(4)) (Termination for default)

Small business coordination forms sent to SBA PCRs Agency Form Title 1 Commerce CD 570 Small business set-aside review 2 Defense 2579 Small business coordination record 3 Energy 4220. 2 Small Business Review form 4 GSA 2689 Small Business Analysis Record 5 HHS 653 Small business review form 6 Homeland Security 700 -22 Small business review form 7 Interior 1886 Acquisition screening and review form 8 Labor Small Business Procurement DL 1 -2004 Determination. 9 NASA NF 1787 Small business review sheet 10 State DS-1910 Small Business Clearance Form 11 Transportation 4250 Small Business Program Review Form AD-1205 Small Business Program – Procurement Review 2268 Procurement Request Review For Small Business… 12 13 USDA VA

Document that you have provided SBA Area Directors with copies of subcontracting plans 19. 705 -6 Postaward responsibilities of the contracting officer. …: (a) Notifying the SBA of the award by sending a copy of the award document to the Area Director, Office of Government Contracting, in the SBA area office where the contract will be performed. (c) Giving to the SBA procurement center representative…. a copy of— (1) Any subcontracting plan submitted in response to a sealed bid solicitation; and (2) The final negotiated subcontracting plan that was incorporated into a negotiated contract or contract modification. (d) Notifying the SBA procurement center representative…. of the opportunity to review subcontracting plans in connection with contract modifications.

C. SBA Quick Reference - SBA Commercial Market Representatives (CMRs) link at: (https: //www. sba. gov/content/cmr-directory) 1. Prime contractor portfolio management 13 CFR 125. 3 2. Reviews of subcontracting plan holders 13 CFR 125. 3 3. Matchmaking 13 CFR 125. 3 4. SBA SUB-Net link at: http: //www. sba. gov/content/sub-net 5. SBA Subcontracting Opportunities Directory link at: http: //www. sba. gov/subcontracting-directory 6. “SBLO Handbook” link at: http: //www. sba. gov/content/smallbusiness-liaison-officer-handbook

D. SBA Quick Reference – SBA Regional and District Offices Link to district offices at: http: //www. sba. gov/about-offices-list/3

D. SBA Quick Reference - SBA District Offices, cont. To locate SBA 8(a) business development servicing office, check Dynamic Small Business Search at the link: http: //dsbs. sba. gov/dsbs/search/dsp_dsbs. cfm and then local resources at the link http: //www. sba. gov/tools/localassistance/districtoffices

E. SBA Quick Reference - SBA Headquarters 1. HUBZone status protests FAR 19. 306 13 CFR 126. 801 2. NAICS code appeal FAR 19. 30 3 13 CFR 121. 1103 3. Non-manufacturer rule waivers FAR 19. 102(f)(1)-(7) 13 CFR 121. 1204 4. SDVOSB status protest FAR 19. 307 13 CFR 125. 23 5. WOSB Program status protest FAR 19. 308/13 CFR 1275. 600

FAR 19. 102 (f ): No class waiver to NMR? Check out an individual waiver*

A. If you find no class waivers, an SBA individual waiver to the Nonmanufacturer Rule (NMR) may help you to achieve small business goals if*: B. A WAIVER FOR A SET-ASIDE IS NOT NEEDED WHEN: B. A 1. ONE SMALL BUSINESS MANUFACTURER: * SMALL BUSINESS SET-ASIDE 2. SMALL BUSINESS MANUFACTURER, BRAND SPECIFIC OF ANY DOLLAR SIZE WITH FAR 6 JUSTIFICATION: * SMALL BUSINESS SET-ASIDE 3. LARGE BUSINESS, BRAND SPECIFIC (OR BRAND EQUIVALENT) REQUIREMENT $25, 000 OR LESS WITH FAR 6: * SMALL BUSINESS SET-ASIDE C. GSA SCHEDULE: USE THE CLOSEST CODE LISTED ON THE SCHEDULE. THEN SAME AS ABOVE IF NO CLASS WAIVER. D. EXCEPTION TO “NMR” IF PROCUREMENT $25, 000 OR LESS. (FAR 19. 102 (F)(7)(B))