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Don't worry, the facts aren't dribbling out. Same facts as part 1. Just separating the agency rationale to allow for a more focused discussion.

Recap: DoD agency has set aside a solicitation as a total small business set-aside. There are 13 line items for different products. For some of them, there is only one known small business manufacturer.

In the RFP, the agency has stated that a small business can team with others to offer all products. For the ones it doesn't make, it can get through subcontracts with its team members. It even says the SB can offer products made by a large business, as long as it meets the Limitation on Subcontracting (LOS) rule (FAR 52.219-14; also in SBA regs).

Two issues here: First, the agency ignores the non-manufacturer rule (NMR)(FAR 52.219-6 and other places; also in SBA regs and in law itself) for the products the SB doesn't make. It claims the NMR only applies to distributors. Therefore, in its own explanation in the RFP, a SB distributor can only offer products made by SBs, but a SB manufacturer can offer products made by a LB.

Second, the agency claims that a SB teaming arrangement only has to comply with the LOS clause and the 50% requirement. However, it applies the 50% to the contract as a whole (i.e. all end items added together) rather than each end item. Therefore the SB prime can include products made by a LB, as long as it stays below 50% of the total contract manufacturing cost.

Again, thoughts on agency's analysis?

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Sometimes, perspective depends on where you are sitting...

Are you an agency employee, who wants to change an agency decision? This isn't bad, mind you -- it is okay for professional employees to share information and insights with their superiors in an attempt to persuade.

Or are you a contractor objecting to the terms of a solicitation?

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Contractor, although I would think the proper reading of the regs is party-neutral.

Q1: does the NMR apply to all SBs, not just distributors, that don't make the product themselves?

Q2: does the LOS apply to the contract as a whole, or to each end item?

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Fara -Have you read 13 CFR 121.404, 121.406 and 125.6? If yes and still confused I would suggest contacting an expert and/or legal counsel in the field of small business contracting

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Not confused at all. Just looking for opinions on the agency rationale, and whether it has any validity.

As for the references:

121.404: this deals with when size is determined. Not really relevant to the issue.

121.406 and 125.6: well yes, that's what the questions are about.

I've provided the agency interpretations above. For the record, here are my views.

Q1: the NMR applies to any SB that offers a product that it does not itself make. Allowing a SB manufacturer to offer a product made by a LB ignores the NMR.

Q2: the LOS applies to each product. The SBA definitions of "cost of manufacturing", "cost of materials" and "subcontracting" at 13 CFR 125.1 make it clear that it applies on a product basis, not the contract as a whole. The FAR uses those terms in the LOS but does not separately define them.

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I believe that, the regulations indicate that any concern (manufacturer or non manufacturer) that does not offer its own products is a non manufacturer.

However, it is interesting to look at your customer’s position.

If the NMR is there to protect the small business manufacturer, you would assume that the small business manufacturer would sell its own products to meet the requirements – and not some other products from some other manufacturer. It follows that the small business manufacturer would be the one damaged if a non manufacturer won by offering products from a large business. But the small business manufacturer wins the deal offering products from a large business - who with standing would complain? A small business non manufacturer such as a distributer offering products from a large business does not have standing. Another competing small business manufacturer offering their own products might complain if they lose.

Alternatively, a Kit Assembler might be able to pull something off, if it meets the requirements:

Organization supplying a kit of supplies or other goods for a special purpose

Cannot exceed 500 employees

50% of the total value of the components in the kit must be manufactured by domestic small business concerns – meeting applicable NAICS code and size standards for those components

Source directed components, manufactured by large businesses are excluded from the 50% calculation

Assembler does not need to be the manufacturer of any of the items in the kit

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