Federal Small Business Subcontracting Plans

March 27, 2012Articles Corporate Compliance Insights

With limited exceptions, unrestricted federal procurements over $650,000 ($1.5 million for construction of any public facility) include Federal Acquisition Regulation (FAR) clauses 52.219-8 (Utilization of Small Business Concerns) and 52.219-9 (Small Business Subcontracting Plan), which require contractors and their first tier subcontractors to make a “good faith effort” to meet or to exceed the procuring agency’s small business subcontracting goals. Failure to make this effort could result in liquidated damages, default termination and negative performance reviews.

This requirement for small business contracting plans raises many questions. Can a contractor count a second tier 8(a) subcontractor even if the first tier is not a small business concern? Does it still count if a first tier service-disabled veteran-owned small business (SDVOSB) subcontractor subcontracts a large portion of its work to a non-SDVOSB?