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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: October 20, 2003

SUBJECT: Small Business Administration (SBA); Achievement of Subcontract Plan Goals

SOURCE: Federal Register, October 20, 2003, Vol. 68, No. 202, page 60015

AGENCIES: Small Business Administration (SBA)

ACTION: Proposed Rule

SYNOPSIS: The SBA is proposing to amend its regulations governing small business subcontracting to address comments received in response to SBA's proposed rule on contract bundling. This proposed rule provides a list of factors to consider in evaluating a prime contractor's performance and good-faith efforts to achieve the requirements in its subcontracting plan. Also, the proposed rule authorizes the use of goals in subcontracting plans, and past performance in meeting such goals, as a factor in source selection when placing orders against Federal Supply Schedules (FSS), government-wide acquisition contracts, and multi-agency contracts.

EDITOR'S NOTE: For more on SBA's final rule on contract bundling that generated the comments that produced this proposed rule, see today's FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 2001-17 and Small Business Administration (SBA); Contract Bundling."

DATES: Comments must be received on or before December 19, 2003.

ADDRESSES: Send comments to Dean Koppel, Assistant Administrator, Office of Policy and Research, 409 Third Street, SW, Mail Code: 6500, Washington, DC 20416; by e-mail to dean.koppel@sba.gov; or to http://www.regulations.gov; or by facsimile to 202-205-6390.

SUPPLEMENTAL INFORMATION: On January 31, 2003, SBA published a proposed rule to solicit comments on its proposal to implement several recommendations included in the Office of Management and Budget's October 2002 report entitled "Contract Bundling: A Strategy for Increasing Federal Contracting Opportunities for Small Business" (for more on the proposed SBA rule, see the January 31, 2003, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR) and Small Business Administration (SBA); Contract Bundling"; for more on "Contract Bundling: A Strategy for Increasing Federal Contracting Opportunities for Small Business," see the October 30, 2002, FEDERAL CONTRACTS DISPATCH "Office of Federal Procurement Policy (OFPP); Contract Bundling: A Strategy for Increasing Federal Contracting Opportunities for Small Business").

Several commenters on SBA's proposed rule identified the need for more guidance on evaluating large prime contractor performance and efforts to achieve the goals specified in their small business subcontracting plans, including examples of what types of conduct constitute "good-faith" efforts to comply with the goals specified in the subcontracting plans.

Small business subcontracting plans are required from large businesses awarded prime contracts in excess of $500,000 ($1,000,000 for construction of a public facility). The subcontracting plan must include dollar and percentage goals that reflect the maximum practicable utilization of small businesses as subcontractors or suppliers in the performance of the contract. A prime contractor that fails to make a good-faith effort to achieve the goals in its subcontracting plan can be terminated for default or assessed liquidated damages. Contracting officers also consider a contractor's good-faith efforts to achieve its subcontracting goals as an important factor in determining whether the contractor deserves an acceptable past performance rating.

"SBA agrees that effective procedures to mitigate the effects of contract bundling on small businesses necessitates more stringent requirements for monitoring compliance with subcontracting plans to ensure that small businesses receive the maximum practical opportunity to participate as subcontractors in large federal contracts," SBA states in the introduction of its final rule on contract bundling. "Many of the commenters recommended amendments that require further consideration to evaluate their likely effectiveness and impact on the procurement process. As a result, SBA is proposing a separate rule...to address many of these comments and suggestions, including the suggestion for more guidance in determining good faith compliance."

This proposed rule would reorganize and amend Title 13 of the Code of Federal Regulations (CFR), Part 125, Government Contracting Programs, Subpart 125.3, Subcontracting Assistance, as follows:

SBA states that it is inviting comments on the proposed rule, "particularly on the provisions concerning the determination of good-faith efforts."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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