FAR Council Releases Small Business Outsourcing Regulation – Corporate / Commercial Law


United States: FAR Council issues updated small business outsourcing regulations

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On September 10, 2021, the FAR Council published a final rule amending the Federal Acquisition Regulation (FAR) to clarify how contracting officers should assess the “good faith efforts” of a prime contractor to comply with a small business outsourcing plan.

Small business subcontracting plans are required of large prime contractors when a contract is expected to exceed $ 750,000 – or $ 1.5 million for construction – and has potential for subcontracting. FAR 19.704 lists the elements of the plan, which include the objectives of the contractor for subcontracting to small businesses and a description of the efforts the contractor will make to ensure that small businesses, small businesses owned Veterans, Small Business Owned by Disabled Veterans, HUBZone Small Businesses, Disadvantaged Small Businesses, and Women Owned Small Businesses have a fair opportunity to compete for subcontracts. Failure to make a good faith effort to comply with the plan may result in the assessment of damages.

The final rule adopts existing Small Business Administration guidelines on this topic, including a list of examples of good faith efforts and a list of examples of failure to make good faith efforts. Here are some examples of good faith efforts:

  • Divide the work to be subcontracted into economically feasible units to facilitate the participation of small businesses;
  • Conduct market research to identify potential subcontractors for small businesses;
  • Solicit small business concerns as early as possible in the acquisition process;
  • Provide interested small businesses with adequate and timely information on plans, specifications and requirements for the execution of the main contract;
  • Negotiate in good faith with interested small businesses;
  • Direct small businesses that need additional help towards SBA;
  • Help interested small businesses obtain the necessary resources;
  • Use the available services of small business associations, offices and other organizations;
  • Participate in an official mentor-protege program with one or more proteges of a small business which results in aid for the development of the proteges;
  • Exceeding the objective of subcontracting in one or more socio-economic categories; and
  • Fulfill all the requirements of the subcontracting plan.

The final rule also provides guidance on what contracting officers should document when assessing whether a contractor has made a good faith effort to comply with a subcontracting plan for a small business. Finally, it requires a contracting officer to give a contractor written notice if the contracting officer decides that the contractor has not made good faith efforts, and provides for a time limit of fifteen. days for the contractor to respond and demonstrate what good faith efforts have been made. .

While this update to the FAR is largely a rewording of the existing SBA guidelines, it clarifies what activities constitute good faith efforts and consolidates guidelines on how these activities should be evaluated. Thus, the final rule helps both contracting officers and contractors to apply and comply with the various regulations regarding small business outsourcing plans.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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