When a company graduates to a large business, one area I have often observed as being overlooked is the small business subcontracting plan. The plan is required for contracts exceeding $700,000 ($1,500,000 for construction) with subcontracting opportunities. The exception to this rule would be under contracts performed entirely outside of the United States and those for personal services. In addition, if your company grows into a large business while performing under a contract that contains clause 52.219-9, Small Business Subcontracting Plan, the contracting officer may now require a subcontracting plan, even though one was not required at award.
There are three types of subcontracting plans: individual, 3-year master, and commercial. The first two have goals negotiated at the contract level and the later has them negotiated based on the overall production of the items or services sold during the company’s fiscal year. FAR 19.704 provides a detailed list of what is required in the plan. Take your time when developing the plan and be sure to address each area. As many of you are aware, the Government works in a checklist mindset so a plan that makes a reasonable effort to address each area, with reasonable goals, should be approved without much discussion. To the contrary, a plan that misses a section or does not contain enough detail will require correction and resubmission.
Normally solicitations advertised under full and open competition will be released with recommended goals developed by the acquisition team. The market research phase, which includes the Sources Sought, would have aided in setting these goals. If you are a large business, you can review the list of interested sources and use this information to target potential small businesses with the requisite capabilities. On the other hand, if you are a small business, be sure to respond to the sources sought for requirements you are able of supporting and allow your company’s information to be viewable in the posting on FedBizOpps. By doing so you are letting the contracting officer know the types of small businesses capable of doing a portion of the work, while also marketing to large businesses looking for subcontractors.
Of course, there are reporting requirements associated with the Subcontracting Plan. The individual and 3-year master subcontracting plans require a semiannual Individual Subcontract Report (ISR) and an annual Summary Subcontract Report (SSR) (semiannual for DoD). The commercial plan only requires an annual SSR. All reports are submitted in the Electronic Subcontracting Reporting System (eSRS) with periods of reporting aligned with the federal fiscal year. The reports are an excellent opportunity to showboat successes in relation to the subcontract goals and a company exceeding these goals will easily achieve a Good or Excellent CPARS rating. To the contrary, a failure to meet a goal, will likely result in the CPARS rating falling to something less than Satisfactory if sufficient rationale is not provided. Therefore, if there was a change in the technical approach, market conditions, or internal capabilities which contributed to not meeting a goal, it is imperative that this is explained in the required reports. Since this rating can be subjective based in the circumstances, a well-reasoned explanation for not meeting a goal may save a rating from falling below Satisfactory.
The benefit of the commercial plan is that once it is approved by the cognizant contracting officer, it can be used for all other commercial contracts without any changes; however, it is only applicable for the current fiscal year. Therefore, a new plan must be submitted 30 working days before the end of the company’s fiscal year. The contracting officer administering the contract with the latest completion date is responsible for negotiating and approving the plan. If goals were missed in the previous period then this is the opportunity to update those goals to something more obtainable, but be sure to substantiate any downward trends with solid rationale as the plan will be reviewed by the local Small Business Specialist and SBA Procurement Center Representative prior to approval by the CO. The more supporting rationale provided, the less chance of needing to address concerns brought during review.
Changes can be made in the individual or master subcontracting plan as well, but it is more of a negotiating process and the changes cannot be made retroactively. I have seen a large business on a couple of occasions get marked down in this area because they simply would not submit an updated plan for negotiating into the contract with more reasonable terms. In these situations, since the contractor failed to meet their subcontracting goals across a couple review periods, they were downgraded below a Satisfactory CPARS rating. (Note: Some agencies will downgrade after a single period.) For this reason, if there are any changes in your production procedures or market conditions which will impact your ability to meet the subcontract goals on contract, it is imperative you bring these issues up with the contracting officer to enable a possible adjustment to the applicable plan’s goals in order to preserve a favorable CPARS ratings as previously discussed.
As you can draw from the summary above, adherence to a small business subcontracting plan is important for large businesses since it is a part of CPARS which plays into contract award decisions. Therefore, take head if you are on the verge of becoming a large business, understand the FAR requirements, and take the time to develop a successful plan. Furthermore, if you are a small business, don’t view a full and open competition as a lost opportunity, approach it as an avenue to target new work that will expand your portfolio with subcontract experience.