Office of Small and Disadvantaged Business Utilization

Small Business Program Policy Manual

Subcontracting

The purpose of this chapter is to provide a basic understanding of the small business program policy and procedure for procurements which require subcontracting plans. You may log onto the OSDBU website to view the department’s current small business goals (http://www.hhs.gov/osdbu/read/).

A. What is a Subcontract Plan?

According to the Federal Acquisition Regulations (FAR), Part 19.7 a subcontract is an agreement entered into by a Government prime contractor with a another contractor, typically a smaller business, to request supplies and/or perform services. Any contractor that receives an award at or above the acquisition threshold must submit a subcontracting plan that provides “maximum practicable opportunity” for small businesses to participate in contract performance. A prime offeror or contractor may submit one of the following subcontracting plans:

Commercial Plan (including goals) - covers the offeror’s fiscal year and applies to the entire production of commercial items sold by either the entire company or a portion thereof (e.g., division, plant, or product line).

Individual Plan - covers the entire contract period (including option periods), applies to a specific contract. It has goals that are based on the offeror’s planned subcontracting in support of a specific contract, except that indirect costs incurred for common or joint purposes may be allocated on a prorated basis to the contract.

Master Plan - contains all the required elements of an individual contract plan, except goals, and may be incorporated into individual contract plans, provided the master plan has been approved.

B. When is a Subcontract Plan Required?

According to FAR 19.702, the Code of Federal Regulations (CFR) 125.3 and the Office of Management and Budget (OMB) Policy Letter 80-2, a subcontract plan is required in contracts and contract modifications over the statutory thresholds. This includes Task Order (RFTOP), Delivery Order or Indefinite-Delivery-Indefinite-Quantity (IDIQ) type contracts. Prime contractors (including small business prime contractors) that will perform services or develop products entirely or partially in United States territory requires a subcontract plan. It is HHS’ policy to require a subcontracting plan for any contract that is expected to exceed the statutory thresholds.

C. Preparation, Submission and Review of a Subcontract Plan

Preparation-Step 1:    Commercial Market Representative Assistance

The Small Business Administration has Commercial Market Representatives (CMR) assigned to its many regions to counsel contractors on how to prepare a subcontracting plan. A CMR may assist a contractor in identifying small business concerns by means of the Central Contractor Registration, Business Matchmaking events, and other resources and tools. Another key aspect of the CMRs’ role in the subcontracting process is to maintain a portfolio of prime contractors for which they conduct Subcontracting Orientation and Assistance Reviews (SOARs).

Submission-Step 2:    Contracting Officer’s Review

The Contracting Officer (CO) shall confirm that the criteria outlined in FAR 19.704 are addressed in the subcontracting plan. Upon receipt of the offeror’s proposed subcontracting plan, the CO will attach it and the support documentation to a HHS Form 653 and forward to the Small Business Specialist for review prior to the issuance of an award. The CO is strongly encouraged to instruct offerors to use the HHS Subcontracting Plan template to expedite the review process. Finally, the CO shall ensure that the terms and conditions of the contract address the submission of subcontracting reports (see Section E of this Chapter).

Review-Step 3:    HHS Small Business Specialist - 5 Business Days

Upon receipt and acceptance of the completed HHS Form 653 and supporting documentation, the HHS Small Business Specialist (SBS) has five (5) business days to review the subcontracting plan and to notify the Small Business Administration (SBA), Procurement Center Representative (PCR) of their concurrence or non-concurrence. If the SBS concurs with the plan, the subcontracting plan is forwarded to the PCR for review.

Review-Step 4:    SBA Procurement Center Representative - 5 to 15 Business Days

In accordance with FAR 19.402, the Small Business Administration (SBA) Procurement Center Representative (PCR) has 5-15 business days to review and respond to the offeror’s proposed subcontracting plan.

If the PCR concurs, the SBS will return the HHS Form 653 with the appropriate signatures to the CO. The CO must file the documentation in the official contract file.

Primarily, the SBS and the PCR are reviewing the plan to ensure that the contractor and the CO made every effort to identify portions of the contract that may be completed or produced by small business concerns. On average, the review process should be completed within 10 business days.

D. Contract Modifications

The Office of Management and Budget (OMB) Policy Letter 80-2 requires the "Contracting Officer to promptly negotiate appropriate revisions to agreed subcontracting percentage and dollar goals if any subsequent amendments to the contract will have a major impact on the original planned volume or type of contracting effort." A subcontracting plan modification must be submitted for review in accordance with Section C of this chapter.

E. Post Award Activities and Reports

1. Contracting Official Reporting Requirements

In accordance with FAR Part 19.705-6, the Contracting Office shall submit a copy of the subcontracting plan to the appropriate SBA District Office.

2. Contractor’s Subcontracting Reporting Requirements

Currently, the Federal Acquisition Regulations (FAR) Counsel is reviewing the FAR to include language to address the Electronic Subcontracting Reporting System (eSRS) which is used to allow prime contractors to submit its Individual Subcontracting Report (ISR, formerly SF 294) and Summary Subcontracting Report (SSR, formerly SF 295). For more information on the eSRS, log onto (https://esrs.symplicity.com/index?_tab=signin&cck=1).

In accordance with FAR Part 19, the prime contractor is required to submit the abovementioned subcontracting reports in the following manner:

F. Monitoring, Documenting and Evaluating Prime Contractor Performance

Upon receipt and acceptance of the Individual Subcontracting Report, the Contracting Officer shall evaluate the prime contractor’s performance and document the file (FAR 19.706). It is the HHS’ policy to use the “HHS Subcontracting Performance Evaluation Report” to document the analysis and evaluation of the contractor’s subcontracting performance.

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