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I am an agency Small Business Program Manager and I discovered that some of our large business prime contractors have awarded small business subcontracts using NAICS Industry Sector 42 and take small business subcontracting credit.

 

In addition, another large business prime contractor awarded ordering agreements specifically using 423840, “Industrial Supplies Merchant Wholesalers” to a number of small businesses (a bullpen of sorts) with orders placed through a centralized electronic catalog by several other large business prime contractors in our agency – a kind of mini-strategic sourcing approach (better volume pricing/better T&Cs/more small business credit/etc.).

 

However, the footnote for this industry sector states,

“(These NAICS codes shall not be used to classify Government acquisitions for supplies. They also shall not be used by Federal Government contractors when subcontracting for the acquisition for supplies. The applicable manufacturing NAICS code shall be used to classify acquisitions for supplies. A Wholesale Trade or Retail Trade business concern submitting an offer or a quote on a supply acquisition is categorized as a nonmanufacturer and deemed small if it has 500 or fewer employees and meets the requirements of 13 CFR 121.406.)”

 

13 CFR 121.406(e) states, “(f) These requirements do not apply to small business concern subcontractors.” 

 

Question 1: Am I safe to assume that the non-manufacturer rule also does not apply to a large business concern’s subcontractors?  That is, the large business prime contractor can take small business credit when awarding subcontracts to small business wholesalers and resellers without having to address nonmanufacturer rule requirements?

 

Normally, I would direct the prime contractor to identify the most applicable manufacturing code for a new requirement and go make award.  However, some of these agreements cover hundreds of supply items and dozens of NAICS codes – with no dominate NAICS.  The mix of supplies purchased also varies order to order, again with no one NAICS being truly dominate.

 

Question 2: In this scenario, could I recommend to the prime contractor that they use a more broad code such as NAICS 339999, All Other Miscellaneous Manufacturing?  This approach would also ease vendor concerns about having to update their SAM records with potentially multiple manufacturing codes.

 

Question 3: Regarding existing subcontracted ordering agreements under Sector 42, can the prime modify the NAICS out of this sector?  Cancelling existing agreements would be extremely disruptive to the industrial complex and I would rather have them repair the issues during the follow-on competitions.

 

Any rules, regulations or other agency examples would also be helpful.  Thanks...

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lyttekg,

These questions are better referred to your agency counsel for resolution. Anything you received here in reply would carry little weight if your legal counsel had a different opinion.

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Gosh, I never thought of that!  Seriously, I was already "advised" that my questions were not really for agency counsel to determine (perhaps, other than Q.3) -- rather, they were geared more toward policy implementation.

Hence, the need to find out if other experts in the contracting arena have ever run across this before.  I was hoping the Q1. would be a fairly straightforward, quick answer; Q2. to be slightly more complex/annoying; and Q3. to be almost unanswerable.  

However, WIFCON has been my first "go to" website when researching procurement issues over the years and I thought that I would create an account and actually post my first question...

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Nonmanufacture Rule applies to small business set asides. A large prime cannot bid as prime on a small business set aside - so the nmr does not apply.

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To clarify

The prime contractor is awarding small business subcontracts and obtaining small business credit toward their subcontracting plan -- so does the NMR apply to subcontracting or can the large business prime make award to small business subcontractors who are wholesalers or resellers and not have to be concerned about NMR requirements?

Thanks for any help

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The NMR does not apply to contracts that are not small business set asides. So you are correct, it is does not apply to subcontracts for those other contracts.Take a look at FAR Part 19.

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