Holomua Consulting Group, LLC
info@holomuaconsulting.com
(808) 369-1471
  • Home
  • About
  • Services
    • SBA 8(a) Program Services
    • DBE Program
  • News
  • Contact
    • Initial Consultations
  • Our Blog
  • Pilot Course
  • Student Portal

​The Small Business Blog

TIPS * UPDATES * INDUSTRY NEWS

SBA Issues Final Rule Implementing Provisions of the 2013 NDAA Pertaining to Limits on Subcontracting

6/11/2016

0 Comments

 
On May 31, 2016, the Small Business Administration issued a Final Rule implementing provisions of the 2013 National Defense Authorization Act, which pertain to performance requirements applicable to small business subcontracting, affiliation and joint ventures.   Holomua Consulting Group submitted comments in response to the Proposed Rule and we are pleased to note that many of our comments were taken into consideration and our suggestions reflected in the Final Rule.  The Final Rule takes effect on June 30, 2016.  The following is a summary of the major points of the Final Rule.
LIMITS ON SUBCONTRACTING

Applicable Limits:  For contracts that have been awarded pursuant to a small business set-aside or socioeconomic set-aside (i.e., 8(a), HUBZone, SDVOB, or WOSB/EDWOSB), the prime contractor may not pay more than 50% (or other amount depending on what type of contract it is) “of the amount paid by the government to it to firms that are not similarly situated.”
  • For mixed contracts, the NAICS Code assigned to the contract will dictate which percentage/limit applies (i.e., services, supply, construction, specialty trade), and the applicable percentage/limit on subcontracting will apply only to that portion of the contract.  
    • ​​​Example: If a contract has both a service and supply component but has been assigned a service NAICS Code since the contract is principally for services, then the 50% percent limit will apply only to the services portion of the contract. The Prime Contractor would be able to subcontract out the entire supply portion to any business.
  • Compliance with the limits on subcontracting will be determined by looking first at the base term and then each subsequent option period.
  • For orders that have been set aside under a full and open contract, the applicable limit on subcontracting must be met for each order.
  • Any amounts subcontracted to “similarly situated entities” will not count as subcontracted for purposes of determining whether the Prime Contractor has violated the limits on subcontracting.
  • A “similarly situated entity” is one that: (1) has the same small business program status as the Prime Contractor with respect to the small business program that qualified the Prime Contractor for award of the contract; and (2) is small for the NAICS code that the Prime Contractor has assigned to the subcontract.
  • Any work that a similarly situated first tier subcontractor then subcontracts to any entity will be counted as subcontracted to a non-similarly situated entity for purpose of determining compliance with the limits on subcontracting.

Penalties: Violation of the limits on subcontracting will be the greater of $500,000 or the dollar amount spent, in excess of permitted levels, by the entity on Subcontractors.
  • In addition, “a party’s failure to comply with the spirit and intent of a subcontract with a similarly situated entity may be considered a basis for debarment.”

JOINT VENTURES

Exception to Affiliation
: Two or more small businesses may joint venture and submit an offer as a small business for any procurement without being affiliated (with regard to performance of that specific procurement) provided that each business is small under the size standard corresponding to the NAICS Code assigned to the contract.

AFFILIATION

Identity of Interest: SBA may presume an identity of interest between firms based upon economic dependence if the concern in question derived 70% or more of its income from another concern over the previous 3-year period.
  • This presumption may be rebutted by showing that despite the contractual relationship with the other firm, the concern at issue is not solely dependent on that other concern (i.e., where the concern at issue has been in business for a short period of time).
  • The SBA clarified that this rule does not apply to firms owned by Indian Tribes, ANCs, NHOs or CDCs.
  • Ostensible Subcontractor: Subcontracts to similarly situated entities will be excluded from consideration under the ostensible subcontractor rule.

If you have any questions about the Final Rule, please contact us at info@holomuaconsulting.com or by telephone at (808) 369-9710.  
0 Comments



Leave a Reply.


    Enter your email address:

    Delivered by FeedBurner

    Archives

    May 2020
    April 2018
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    March 2017
    February 2017
    December 2016
    November 2016
    October 2016
    August 2016
    June 2016
    March 2016
    February 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    March 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014


    Categories

    All
    8(a) BD Program
    Affiliation
    Affirmative Action
    Business Development
    Compensation
    Conferences
    Contractor Compliance
    DBE
    DFARS
    Employment
    Events
    FAR
    Federal Contracting
    FLSA
    GAO Protest
    General Business Tips
    GovCon Tips
    Government Contractor Compliance
    HR Compliance
    HUBZone
    Joint Ventures
    Marketing
    Market Research
    Native Hawaiian Issues
    NHO
    OFCCP
    Ostensible Subcontractor Rule
    SBA OHA Decisions
    SBA Regulations
    SBIR
    SDVOSB
    Size Protests
    Small Biz Tools
    Small Business Compliance
    Small Business Programs
    Subcontracting
    WOSB

CONTACT US

  • (808) 369-1471
  • info@holomuaconsulting.com
  • P.O. Box 29735, Honolulu 96820

    Newsletter, alerts & updates, promotions

Subscribe
Back to top
  • Home
  • About
  • Services
    • SBA 8(a) Program Services
    • DBE Program
  • News
  • Contact
    • Initial Consultations
  • Our Blog
  • Pilot Course
  • Student Portal
Picture
Picture
Picture
Picture
© 2014 Holomua Consulting Group, LLC.  All Rights Reserved.