Managing Subcontract Management Plans Breakout Session #305 Name: Tom Reid 1
Managing Subcontract Management Plans Presented by: Tom Reid, JD, CPCM Chief Problem Solver Certified Contracting Solutions, LLC
Syllabus PRE-AWARD • Statutory and regulatory underpinnings for requiring small business subcontracting plans. • When a subcontracting plan is required, dollar thresholds, when to submit, how goals are set, and required content. • Discussion of the roles and responsibilities of interested parties, including: • Contracting officers • Contract specialists/contract administrators • Other project team members • Contractors • Other competitors • Indian tribes • The U.S. Small Business Administration (SBA) • Protests by the contracting officer or SBA; protests by other interested parties. • Dealing with unacceptable subcontracting plans, the negotiation process, and role of the SBA • Individual, master, and commercial subcontracting plans
Syllabus (con’t) POST AWARD • Negotiation pre-award and post award • Subcontracting plan monitoring during contract performance – who does what when • Determining satisfactory performance; timing and actions required; “good faith” efforts. • Remedies, notice requirements, final decisions, and the disputes process. • Liquidated damages and the “miscellaneous receipts” problem. • Reporting requirements, roles and responsibilities, and the Electronic Subcontracting Reporting System (eSRS)
References • FAR Part 19 • 15 USC §631 • 41 USC §252 • 13 CFR Part 121 • FAR Part 52 • 10 USC §2323
Schools of Jurisprudence Natural School Historical School Analytical School Sociological School Command School Critical Legal Studies Law and Economics School
Public Policy on Small Business “It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation.” 15 USC §631 (a)
Socioeconomic Policies May be legislated policies or edicts stemming from executive order Permit the taking of a contractual action that is not based on the lowest price/best value to the government or not consistent with the rules for full and open competition. Designed to further a particular governmental objective.
They who have the gold make the rules! The Golden Rule
Summary It is a matter of public policy that small businesses will be supported By various other legislative statements, Congress has further stated support for a variety of businesses by granting them a preferred status These policies take precedence over other procurement policies
FAR Part 19 Overview • Subpart 1 – Size Standards • Subpart 2 – Policies • Subpart 3 – Determination of Status • Subpart 4 – Cooperation with SBA • Subpart 5 – Small Business Set Asides • Subpart 6 – COC’s and Responsibility • Subpart 7 – Small Business Subcontracting Program
FAR Part 19 Overview • Subpart 8 – The 8(a) Program • Subpart 9 – Reserved • Subpart 10 – Small Business Competitiveness Demonstration Program • Subpart 11 – Price Evaluation Adjustments • Subpart 12 – Small Disadvantaged Businesses • Subpart 13 – HUBZone Program • Subpart 14 – SDVOSB Program
Status of Woman-Owned Small Business Goals Legislation Regulations – Round 1 Regulations – Round 2 Regulations – Round 3 Current Status
Current Regulation § 127.501 How will SBA and the agencies determine the industries that are eligible for EDWOSB or WOSB requirements? (a) SBA determination of underrepresented or substantially underrepresented industries. (1) Approximately every five years, SBA will conduct a study to identify the industries in which WOSBs are underrepresented or substantially underrepresented in Federal contracting. The study will include an analysis of the extent of disparity of WOSBs in Federal contracting. (2) Data collection. In determining the extent of disparity of WOSBs in Federal contracting, SBA may request that the head of any Federal department or agency provide SBA, or other designated entity, data or information necessary to analyze the extent of disparity of WOSBs in Federal contracting. (3) Based upon its analysis, SBA will designate by 4-digit NAICS Industry Subsector industries in which WOSBs are underrepresented or substantially underrepresented. (b) Agency determination of discrimination. Each agency that is considering restricting competition with respect to a contract in an industry pursuant to this rule is responsible for carrying out a relevant analysis that would justify a restriction on competition under the equal protection requirements of the Due Process Clause of the Fifth Amendment of the Constitution. Where an agency seeks to reserve a procurement for competition exclusively among WOSBs or EDWOSBs within an industry designated by SBA in paragraph (a)(3) of this section, the agency must conduct an appropriate analysis of the agency's procurement history and make a determination of whether there is evidence of relevant discrimination in that industry by that agency.
Government Responsibilities Use set-asides for preference holders Work closely with SBA to encourage small business participation Counsel and assist small businesses Refer negative responsibility determinations for small businesses to SBA Enforce contract clauses aimed at assisting small businesses and preference holders
Small Business Subcontracting Use the appropriate clauses Require a workable plan Assist in locating eligible firms Require reports and review them Administer the clause up to and including assessing liquidated damages or terminating the contract File accurate past performance reports
When Required - Situations Subcontracting Plan Required • From large businesses, state/local governments, educational institutions, foreign owned firms • On contracts > $550K ($1M construction) AND subcontracting opportunities exist • On modifications > $550K ($1M construction) with new work AND subcontractingopportunities exist • On Multi-year contracts / contracts with options • Cumulative value of base contract & all options • SEPARATE goals for base & each option Subcontracting Plan NOT Required: • From small businesses • For personal services contracts • For contracts / modifications performed entirely outside US & outlying areas
For all procurements: “Within the time limit prescribed by the contracting officer” For negotiated acquisitions only “Acceptable to the contracting officer” May be required with original offer or any time prior to award Integrity of process Maximum opportunity for small business Burden placed on offerors When Required - Timeliness Ref: FAR 19.702(a) and 19.705-2(d)
Types of Plans Individual Master Commercial Comprehensive (DOD only)
Plan types • Individual • Goals support planned subcontracting for full term of contract • Covers entire contract period, including options • Contains required elements (FAR 19.704) • May include pro rata share of overhead SB awards • Submit ISR (semiannually) • Submit SSR (annually all others) • Master • Boiler plate plan – Same required elements as Individual Plan except goals • Goals negotiated for each applicable contract • Effective for 3 years after approval of CO • May be developed on Plan / Division basis • Submit ISR (semiannually) • Submit SSR (annually all others)
Plan Types Continued • Commercial • Preferred for commercial items (as defined in FAR 2.101) • Applies to entire production of commercial items sold by either the entire company or a portion thereof (division, plant, or product line) • Contains required elements (FAR 19.704) • Plan (including goals) covers contractor’s fiscal year • Annual plan (all government contracts in effect during that period) • Submit SSR annually • Comprehensive Subcontracting Plan (CSP) • DoD Test Program (expires 30 Sept 2010) • May be on Plan/Division/Corporate basis • Annual plan • DCMA administers program • Submit SSR (semiannually)
Subcontracting Plans For all contracts over the simplified acquisition threshold: • Contractor must agree that preference holders will have “maximum practicable opportunity to participate in contract performance consistent with its efficient performance” • Contractor must agree to pay such companies promptly
Subcontracting Plan Contents Ref: FAR 19.704 • Separate percentage goals for EACH preference category including WOSB • A statement of total dollars to be spent with subcontractors spread by each preference • Description of supplies and services to be subcontracted, and those that will be targeted to the various preference holders
Contents Continued • Description of method used to develop goals • Description of method used to identify potential suppliers • Treatment of indirect costs in achieving goals • Name and job description of person charged with administering the plan
Contents Continued • The efforts the contractor will make to “ensure” that preference holders have an equitable opportunity to compete • Assurance of flow-down inclusion, enforcement, and administration of plan requirements with subs
Contents Continued • Agreement to: • Participate in studies and surveys • Report on plan progress • Use of eSRS • Ensure subs also report • Provide prime contract number and DUNS number to first tier subs (to link eSRS reports) • Require first tier subs with reporting requirements to provide same info to their subs • Records that will be maintained
Federal Goals • SBA negotiates goals with the Federal agencies to establish individual agency goals such that in the aggregate, the Government-wide goals are established. • Before the beginning of the fiscal year, agencies submit proposed goals to SBA. SBA's Office of Government Contracting determines if these individual agency goals, in the aggregate, meet or exceed the government-wide statutorily mandated goals in each small business category. When that is achieved, SBA notifies the agencies of the final goals
Statutory Goals Source:http://www.sba.gov/aboutsba/sbaprograms/goals/SBGR_2006_STATUTORY_GOALS.html • The statutory goals are as follows: • 23 percent of prime contracts for small businesses; • 5 percent of prime and subcontracts for small disadvantaged businesses; • 5 percent of prime and subcontracts for women-owned small businesses; • 3 percent of prime and subcontracts for HubZone businesses • 3 percent of prime and subcontracts for service-disabled veteran-owned small businesses.
What is Acceptable? Every agency has its own “nature” to its procurement Each program has a unique set of subcontracting opportunities Each industry has its unique set of small business preference holders available and capable of performing the work Every prime contractor has its own make-or-buy philosophy There can be no fixed rules on acceptable subcontracting Only through a detailed analysis of the work to be done, the circumstances of the market, and the capabilities of the prime can a determination be made concerning the appropriate level of subcontracting goals.
How has the Government Done? Source: http://www.sba.gov/idc/groups/public/documents/sba_homepage/press_release_08_106.pdf Small Business Goaling Summary Report 2006 2006 2007 2007 Category Goal % Revised $ % $ Small Businesses 23% 22.8% $77.7 billion 22% $83.2 billion Small Disadvantaged Businesses 5% 6.8% $23 billion 6.6% $24.9 billion Service-disabled Vets 3% 0.9% $2.9 billion 1.01% $3.8 billion Women 5% 3.4% $11.6 billion 3.4% $13 billion HUBZone 3% 2.1% $7.2 billion 2.2% $8.5 billion
Scorecard Ratings Ratings of performance on all five goals: • Three agencies – VA, DOE and SBA – met or surpassed their goals in all areas. • Seven agencies – DHS, USDA, DOT, and DOI, NRC, GSA, and EPA – met or surpassed four of the five goals. • Two agencies – DOL and State, – met or surpassed three of the five goals. • Five agencies – Treasury, HUD, OPM, NSF and NASA – met or surpassed two of the five goals. • Five agencies – DOC, DOD, SSA, Department of Education, and HHS – met or surpassed one of the five goals. • Two agencies – DOJ and USAID – met none of the five goals.
DOI IG In a July 2008 report: “The main reasons that contracts to large businesses have been incorrectly coded as small business contracts relate to data entry mistakes, reliance on incorrect data, and a failure on the part of contracting officials to verify business size reported in Central Contract Registration,” said DOI Inspector General Earl Devaney.
Dealing with Unacceptable Plans • CO must review plans to ensure compliance with requirements • Factors to consider: • Prior involvement of small Businesses in prior prime or subcontracts for similar acquisitions • Proven methods of getting small businesses involved as subs in similar acquisitions • Relative success by prime in the past, based on the records it has maintained
Reasonable Goals The goals should be based on current and accurate market data The goals should be achievable, but not a slam-dunk There should be some risk and challenge Post-award the reports are reviewed and active discussions held regarding progress Modifications should yield new goals
Pre-Award Responsibilities Consider past subcontracting performance as a factor in responsibility Assure timely submission of plan Notify SBA and give opportunity to comment Determine incentive fee (if applicable) Ensure that an acceptable plan is incorporated and made a material part of the contract Even letter contracts must contain at least a rudimentary plan
IFB Ref: FAR 19.705-4(b) • Review for compliance with 11 elements • If unacceptable must • Specify deficiency • Set fixed time for resubmission • If not submitted by deadline, bidder is not eligible for award • Even if responsive, evidence of intent to NOT comply shall yield a nonresponsibility determination
RFP Ref: FAR 19.705-4(c) Negotiate each of the 11 items Set goals at level reasonable under the circumstances Avoid unreasonably low goals Define “good faith efforts” Avoid goals that would unreasonably increase cost or frustrate acquisition objectives
Post Award Issues • Re-negotiating • Monitoring the plan • What is satisfactory performance • What is good faith? • Remedies, notice, and disputes • Role of the Contract Disputes Act
Post Award Responsibilities Notify SBA of the award Forward commercial plans to SBA region Provide copy of plan to SBA rep Notify SBA of opportunity to review revised plan due to modifications Assess liquidated damages when appropriate Take action to enforce contract Acknowledge and approve reports
Companies self-certify their status, except for 8(a) and HUBZone These also self certify, but must be verified through CCR Locked fields Only SBA can modify Contractors and CO’s may, in good faith, rely on the written self-certifications, but must verify 8(a) and HUBZone Certification
Protests of Status By Contracting Officer By SBA By Competitors By Other Interested Parties
Typically the CO or the SBA may protest preference status “Other interested parties” may submit information to CO or SBA to encourage them to protest status Processed through SBA using procedures found in 13 CFR §124.1015 through §124.1022 Protests
Flow-down Provisions FAR 52.219-8, Utilization of SB Concerns • All subcontracts, including those to small businesses, that offer subcontracting opportunities FAR 52.219-9, SB Subcontracting Plan • Requires all subcontractors (except SBs) with subcontracts > $550K ($1M construction) and subcontracting opportunities to adopt subcontracting plan and submit subcontracting reports [Individual Subcontracting Report (ISR) and Summary Subcontracting Report (SSR)] • Prime contractor / higher-tier subcontractors review their subcontractor's ISRs • Government reviews prime’s ISRs and all subcontractors’ SSRs
Monitoring the Plan • Who does what and when? • Contracting officers (of all types) • Contract specialists/contract administrators • Other project team members • Prime Contractors • Subcontractors • Other prime competitors • Potential subs including Indian tribes • The U.S. Small Business Administration (SBA)
Role of the SBA Ref: FAR 19.707 • Assist both agencies and contractors in carrying out plans • Review solicitations requiring plans within 5 days • Review and make recommendations on any anticipated negotiated award within 5 days • Evaluate contractor’s compliance with plans • SBA has no authority to: • Direct awards • Prescribe level of subcontracting • Exercise any CO administrative authority
Indian Tribes FAR 19.703(c)(1)(i) tells us that subcontracts awarded to an ANC or Indian tribe shall be counted towards the subcontracting goals for small business and SDB concerns regardless of the size or SBA status of the entity. (ii) provides that the TRIBE gets to designate which tier of up line contractor gets to claim the credit Protests concerning status may be made by any “interested party” and are handled by BIA, not the SBA. See FAR 26.103