The FAR (Federal Acquisition Regulations) Councils are proposing to amend the FAR to bring it into conformity with certain SBA (Small Business Administration) regulations regarding limitations on subcontracting.
Under various rules, sometimes prime contractors are required to perform a certain percentage of work itself whereas under other programs, prime contractors could include subcontracts to "similarly situated entities" in the percentage of work it performed. The methods for calculating compliance also varies across small business programs.
A previous NDAA (National Defense Authorization Act) changed the focus on limitations on subcontracting rules. Instead of requiring a percentage of work to be performed by a prime contractor, the limitation on subcontracting rules now limit subcontracting to a percentage of the overall award amount to be spent by prime contractors on subcontractors. This is a much easier calculation.
Contractors no long will need to track the percentage of costs incurred that it spends performing work itself; it only has to track the percentage of the overall award amount (i.e. contract price) that it spends on subcontractors.
Additionally, the percentage of award amount that the prime contractor spends on subcontractors who are similarly situated entities is not considered subcontracted for purposes of complying with the limitation on subcontracting. "Similarly Situated Entities" are subcontractors that have the same small business program status as that which qualified the prime contractor for the award and is considered small for the NAICS code the prime contractor assigned to the subcontract for which the subcontractor will perform.
These changes, if adopted (and they no doubt will be adopted) will give small businesses greater flexibility on how they choose to comply with the limitations on subcontracting.
Read more about the proposed change here.
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