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frank.watson

Contract Employees /Staffing Small Business Goals

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Quick question:

What is the guidance on subcontractors using staffing firms for temp to perm. They are considered "contract employees" during that time- how does this effect my claiming the small business goal/status of the subcontractor using the staffing agency. I assume small businesses can use temp to perm but what is the delineation between the small business operating as a small business vs being the small business just passing through revenue to a larger staffing firm.

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frank,

It seems to me that your subcontractor has awarded a lower-tier subcontract to the staffing agency it is using for temp-to-perm employees. I would expect your subcontractor to count that award in its socioeconomic reporting. I would expect that you would count your award to your subcontractor in your socioeconomic reporting.

As for your question about delineation, there are rules against "excessive pass-through costs" which state that the delineation occurs at 70%. If 70% or more of the total cost of the awarded contract is being performed by subcontractors then additional work needs to be performed to justify why there is a middle-man. See FAR 52.215-22 and 52.215-23.

Hope this helps.

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frank,

It seems to me that your subcontractor has awarded a lower-tier subcontract to the staffing agency it is using for temp-to-perm employees. I would expect your subcontractor to count that award in its socioeconomic reporting. I would expect that you would count your award to your subcontractor in your socioeconomic reporting.

As for your question about delineation, there are rules against "excessive pass-through costs" which state that the delineation occurs at 70%. If 70% or more of the total cost of the awarded contract is being performed by subcontractors then additional work needs to be performed to justify why there is a middle-man. See FAR 52.215-22 and 52.215-23.

Hope this helps.

I am guessing though that if there are agreements or intentions to not ever convert them from Temp to Perm then its strictly a 2nd tier subcontractor relationship.

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frank, I don't think the substance of the agreement or the intentions really affect whether or not it's reported as a subcontract award.

H2H

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frank, I don't think the substance of the agreement or the intentions really affect whether or not it's reported as a subcontract award.

H2H

I was more finding the line between a Temp to Perm vs straight subcontracting to a large staffing firm. For example I am a Prime Contractor with a 20% small business 8a requirement- I sub 20% to an 8a company who then subcontracts it to another large non-8a business. Maybe its a grey area?

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frank, I don't think I can help you any more. Perhaps there are others here who can help you find your answer.

H2H

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Frank, the FAR and SBA regulations do not impose the "50% rule" on subcontractors. You awarded a subcontract to an 8(a). Is there any question about the SDB status of that subcontractor including its size? If so, have you taken appropriate action described in FAR 19.703? If not, what is your concern? I'm trying to understand what the problem is as you see it.

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Frank, the FAR and SBA regulations do not impose the "50% rule" on subcontractors. You awarded a subcontract to an 8(a). Is there any question about the SDB status of that subcontractor including its size? If so, have you taken appropriate action described in FAR 19.703? If not, what is your concern? I'm trying to understand what the problem is as you see it.

Say I am a Large Company. I win a 100 Mil contract of some sort and in the requirement is lets say a 30% 8a small business subcontracting requirement. So 30% of 100Mil must be subcontracted to an 8a small business to be compliant. If the 8a company then turns around and subs their positions to another large company and in essence just pass the revenue through. Trying to find language around that issue

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Unless you include a special provision in the subcontract to the 8(a), there is no requirement for a small business subcontractor to do any percentage of the work called for by the subcontract. However, the SBA has what is known as the ostensible subcontractor rule which is used to determine affiliation and the size status of a concern. If a supposed small business is unusually reliant upon a subcontractor to perform work, the two can be considered affiliated and the size of the two combined to determine if the supposed small business is small. Whether the ostensible subcontractor rule applies in a particular case is a matter for determination by the SBA through a size protest. Again, look at FAR 19.703.

By the way, FAR 52.219-9 does not require subcontracting goals for 8(a) concerns, but does for SDBs, which is a broader category than just 8(a) concerns.

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