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Amendments to 13 CFR 125.6, Limitations on Subcontracting

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13 CFR 125.6 had previously been applicable to all small business concerns. However, I noticed that it has been amended in a way that makes its application very confusing.

Section (a) references "small business concerns," but now section (B ) has been made specifically applicable to SDVO SBCs, and section ( c ) is applicable to HUBZone firms.

There no longer appears to be a section generally applicable to small business concerns.

Am I missing something?!?

I've copied the applicable CFR section below for convenience. Your comments would be appreciated.

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§125.6 What are the prime contractor performance requirements (limitations on subcontracting)?

(a) In order to be awarded a full or partial small business set-aside contract, an 8(a) contract, or a WOSB or EDWOSB contract pursuant to part 127 of this chapter, a small business concern must agree that:

( B ) An SDVO SBC prime contractor can subcontract part of an SDVO contract (as defined in §125.15) provided:

(1) In the case of a contract for services (except construction), the SDVO SBC spends at least 50% of the cost of the contract performance incurred for personnel on the concern's employees or on the employees of other SDVO SBCs;

(2) In the case of a contract for general construction, the SDVO SBC spends at least 15% of the cost of contract performance incurred for personnel on the concern's employees or the employees of other SDVO SBCs;

(3) In the case of a contract for construction by special trade contractors, the SDVO SBC spends at least 25% of the cost of contract performance incurred for personnel on the concern's employees or the employees of other SDVO SBCs; and

(4) In the case of a contract for procurement of supplies or products (other than procurement from a non-manufacturer in such supplies or products), at least 50% of the cost of manufacturing the supplies or products (not including the costs of materials), will be performed by the SDVO SBC prime contractor or other SDVO SBCs.

(5) In accordance with §125.15(B )(3), the SDVO SBC joint venture must perform the applicable percentage of work.

© A qualified HUBZone SBC prime contractor can subcontract part of a HUBZone contract (as defined in §126.600 of this chapter) provided:

(1) In the case of a contract for services (except construction), the qualified HUBZone SBC spends at least 50% of the cost of the contract performance incurred for personnel on the concern's employees or on the employees of other qualified HUBZone SBCs;

(2) In the case of a contract for general construction, the qualified HUBZone SBC spends at least 15% of the cost of contract performance incurred for personnel on the concern's employees;

(3) In the case of a contract for construction by special trade contractors, the qualified HUBZone SBC spends at least 25% of the cost of contract performance incurred for personnel on the concern's employees;

(4) In the case of a contract for procurement of supplies (other than procurement from a regular dealer in such supplies), the qualified HUBZone SBC spends at least 50% of the manufacturing cost (excluding the cost of materials) on performing the contract in a HUBZone. One or more qualified HUBZone SBCs may combine to meet this subcontracting percentage requirement; and

(5) In the case of a contract for the procurement by the Secretary of Agriculture of agricultural commodities, the qualified HUBZone SBC may not purchase the commodity from a subcontractor if the subcontractor will supply the commodity in substantially the final form in which it is to be supplied to the Government.

(d) SBA may use different percentages if the Administrator determines that such action is necessary to reflect conventional industry practices among small business concerns that are below the numerical size standard for businesses in that industry group. Representatives of a national trade or industry group or any interested SBC may request a change in subcontracting percentage requirements for the categories defined by six digit industry codes in the North American Industry Classification System (NAICS) pursuant to the following procedures.

(1) Format of request. Requests from representatives of a trade or industry group and interested SBCs should be in writing and sent or delivered to the Director, Office of Government Contracting, U.S. Small Business Administration, 409 3rd Street, SW., Washington, DC 20416. The requester must demonstrate to SBA that a change in percentage is necessary to reflect conventional industry practices among small business concerns that are below the numerical size standard for businesses in that industry category, and must support its request with information including, but not limited to:

(i) Information relative to the economic conditions and structure of the entire national industry;

(ii) Market data, technical changes in the industry and industry trends;

(iii) Specific reasons and justifications for the change in the subcontracting percentage;

(iv) The effect such a change would have on the Federal procurement process; and

(v) Information demonstrating how the proposed change would promote the purposes of the small business, 8(a), SDB, woman-owned business, or HUBZone programs.

(2) Notice to public. Upon an adequate preliminary showing to SBA, SBA will publish in the Federal Register a notice of its receipt of a request that it considers a change in the subcontracting percentage requirements for a particular industry. The notice will identify the group making the request, and give the public an opportunity to submit information and arguments in both support and opposition.

(3) Comments. SBA will provide a period of not less than 30 days for public comment in response to the Federal Register notice.

(4) Decision. SBA will render its decision after the close of the comment period. If SBA decides against a change, SBA will publish notice of its decision in the Federal Register. Concurrent with the notice, SBA will advise the requester of its decision in writing. If SBA decides in favor of a change, SBA will propose an appropriate change to this part.

(e) Compliance will be considered an element of responsibility and not a component of size eligibility.

(f) The period of time used to determine compliance for a total or partial set-aside contract will be the base term and then each subsequent option period. For an order set aside under a full and open contract or a full and open contract with reserve, the agency will use the period of performance for each order to determine compliance unless the order is competed amongst small and other-than-small businesses (in which case the subcontracting limitations will not apply). However, the contracting officer, in his or her discretion, may require the concern to perform the applicable amount of work or comply with the nonmanufacturer rule for each order awarded under a total or partial set aside contract.

(g) Work to be performed by subsidiaries or other affiliates of a concern is not counted as being performed by the concern for purposes of determining whether the concern will perform the required percentage of work.

(h) Where an offeror is exempt from affiliation under §121.103(h)(3) of this chapter and qualifies as a small business concern, the performance of work requirements set forth in this section apply to the cooperative effort of the joint venture, not its individual members.

(i) Where an offeror is exempt from affiliation under §121.103(B )(8) of this chapter and qualifies as a small business concern for a reserve of a bundled contract, the performance of work requirements set forth in this section apply to the cooperative effort of the small business team members of the Small Business Teaming Arrangement, not its individual members.

(j) The contracting officer must document a small business concern's performance of work requirements as part of the small business' performance evaluation in accordance with the procedures set forth in FAR 42.1502. The contracting officer must also evaluatecompliance for future contract awards in accordance with the procedures set forth in FAR 9.104-6.

[61 FR 3312, Jan. 31, 1996; 61 FR 39305, July 20, 1996; as amended at 64 FR 57372, Oct. 25, 1999; 65 FR 45835, July 26, 2000; 69 FR 25266, May 5, 2004; 69 FR 29208, May 21, 2004; 69 FR 29420, May 24, 2004; 70 FR 14527, Mar. 23, 2005; 70 FR 51248, Aug. 30, 2005; 72 FR 3040, Jan. 24, 2007, 72 FR 50041, Aug. 30, 2007; 73 FR 56948, Oct. 1, 2008; 78 FR 61143, Oct. 2, 2013]

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Para. (a) addresses to small business set-asides. Para. (a) is "generally applicable to small business concerns."

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Nope.

Below is the extract...

§ 125.6 Prime contractor performance requirements ( limitations on subcontracting ).

( a ) In order to be awarded a full or partial small business set-aside contract, an 8( a ) contract, a WOSB or EDWOSB contract pursuant to part 127 of this chapter, or an unrestricted procurement where a concern has claimed a 10 percent small disadvantaged business ( SDB ) price evaluation preference, a small business concern must agree that:
( 1 ) In the case of a contract for services ( except construction ), the concern will perform at least 50 percent of the cost of the contract incurred for personnel with its own employees.
( 2 ) In the case of a contract for supplies or products ( other than procurement from a non-manufacturer in such supplies or products ), the concern will perform at least 50 percent of the cost of manufacturing the supplies or products ( not including the costs of materials ).
( 3 ) In the case of a contract for general construction, the concern will perform at least 15 percent of the cost of the contract with its own employees ( not including the costs of materials ).
( 4 ) In the case of a contract for construction by special trade contractors, the concern will perform at least 25 percent of the cost of the contract with its own employees ( not including the cost of materials ).

( b ) An SDVO SBC prime contractor can subcontract part of an SDVO contract ( as defined in § 125.15 ) provided:
( 1 ) In the case of a contract for services ( except construction ), the SDVO SBC spends at least 50% of the cost of the contract performance incurred for personnel on the concern's employees or on the employees of other SDVO SBCs;
( 2 ) In the case of a contract for general construction, the SDVO SBC spends at least 15% of the cost of contract performance incurred for personnel on the concern's employees or the employees of other SDVO SBCs;
( 3 ) In the case of a contract for construction by special trade contractors, the SDVO SBC spends at least 25% of the cost of contract performance incurred for personnel on the concern's employees or the employees of other SDVO SBCs; and
( 4 ) In the case of a contract for procurement of supplies or products ( other than procurement from a non-manufacturer in such supplies or products ), at least 50% of the cost of manufacturing the supplies or products ( not including the costs of materials ), will be performed by the SDVO SBC prime contractor or other SDVO SBCs.
( 5 ) In accordance with § 125.15( b )( 3 ), the SDVO SBC joint venture must perform the applicable percentage of work.

( c ) A qualified HUBZone SBC prime contractor can subcontract part of a HUBZone contract ( as defined in § 126.600 of this chapter ) provided:
( 1 ) In the case of a contract for services ( except construction ), the qualified HUBZone SBC spends at least 50% of the cost of the contract performance incurred for personnel on the concern's employees or on the employees of other qualified HUBZone SBCs;
( 2 ) In the case of a contract for general construction, the qualified HUBZone SBC spends at least 15% of the cost of contract performance incurred for personnel on the concern's employees;
( 3 ) In the case of a contract for construction by special trade contractors, the qualified HUBZone SBC spends at least 25% of the cost of contract performance incurred for personnel on the concern's employees;
( 4 ) In the case of a contract for procurement of supplies ( other than procurement from a regular dealer in such supplies ), the qualified HUBZone SBC spends at least 50% of the manufacturing cost ( excluding the cost of materials ) on performing the contract in a HUBZone. One or more qualified HUBZone SBCs may combine to meet this subcontracting percentage requirement; and
( 5 ) In the case of a contract for the procurement by the Secretary of Agriculture of agricultural commodities, the qualified HUBZone SBC may not purchase the commodity from a subcontractor if the subcontractor will supply the commodity in substantially the final form in which it is to be supplied to the Government.

(spaces added with parentheses to avoid automatic conversion to smiley faces)

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ji20874, I believe you're citing an older (2013) version of this regulation. If you look it up on eCFR (http://www.ecfr.gov/) the sub-paras (1) through (4) are absent under para (a).

Also, see the 2014 edition of the CFR on http://www.gpo.gov/fdsys/browse/collectionCfr.action?collectionCode=CFR

Direct link to section: http://www.gpo.gov/fdsys/pkg/CFR-2014-title13-vol1/pdf/CFR-2014-title13-vol1-sec125-6.pdf

Compare this to the 2013 edition, which actually makes sense, and appears to be what you are citing:

http://www.gpo.gov/fdsys/pkg/CFR-2013-title13-vol1/pdf/CFR-2013-title13-vol1-sec125-6.pdf

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There is an editing error in the eCFR. If you go back to the Federal Register of October 2, 2013, only the first sentence in (a) was revised. The rest of what ji quoted was unchanged and is still a part of 125.6.

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Retreadfed, I noticed that too. The editing error also made it into the 2014 annual edition of the CFR. I think I'll send a notice to Dean Koppel, who is the POC on that Oct. 2, 2013 Federal Register. Or would there be a better POC to correct this?

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