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ContractingPeoplesHatred

Small Business Set Aside Under $150k Subcontracting with Large Business

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Hello, 

I am having trouble justifying a response with a cited intelligible answer to the following situation:
 
What limits a small business from subcontracting out a majority of the work to a large business for an acquisition under $150K? If I received a quote that outlines that the large business will do 99% of the work do I have anything to cite to throw them out? 
 
Procurement information: 
  • Under FAR Part 13
  • Dollar value is estimated below $150k
  • Total set aside for small business
  • FAR 52.219-14 was not included in the solicitation as the acquisition is estimated below $150k.
  • FAR 52.219-6 was checked in the solicitation. 
 
 
 

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I agree with Don with respect to a small business set-aside based on the prescription for clause 52.219-14.  However, if your procuring an end product you'll want to ensure compliance with the non-manufacturer rule (FAR 19.102(f)).

While it may not apply to your situation, I would add that if you are setting aside a requirement for 8a there is not a dollar value related to the prescription of clause 52.219-14.  Also, the HUBZone, WOSB, and SDVOSB set aside clauses include subcontracting limitations which do not have dollar thresholds in the prescription.

 

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18 hours ago, Todd Davis said:

However, if your procuring an end product you'll want to ensure compliance with the non-manufacturer rule (FAR 19.102(f)).

That doesn't apply under $150K, either. See 13 CFR 121.406( d ):

Quote

The performance requirements (limitations on subcontracting) and the nonmanufacturer rule do not apply to small business set-aside acquisitions with an estimated value between $3,500 and $150,000.

Note that this rule has not yet been implemented in the FAR, so compliance with the nonmanufacturer rule would still apply over $25,000.

Edited by Don Mansfield

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14 hours ago, Don Mansfield said:

That doesn't apply under $150K, either. See 13 CFR 121.406( d ):

 

Thanks Don.  That makes sense since the prescription for the subcontracting limitation clause 52.219-14 states that it is not used for small business set asides not expected to exceed $150K.  Not sure why the FAR wouldn't state the nonmanufacturer rule does not apply for small business set aside actions not exceeding the $150K.  I know the FAR make reference to 13 CFR Part 121.  Since the OP comment said their action is a small business set aside, then I agree the nonmanufacturer rule does not apply.

Having said that, the exception seems to apply to small business set asides only and not to the other types of set asides under FAR Part 19.  I believe this is why the prescription is different for 52.219-14 when it comes to 8a procurements and why the subcontracting limitations and nonmanufacturer rule applicability is addressed in the other set aside clauses.  The prescription for these other set aside clauses are not dollar threshold dependent.  Do you see it the same way, or am I missing something?

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ContractingPeoples - I do not want to make more of this than should be but the following statement you made needs some expansion with regard to a response in my view.....

On ‎6‎/‎21‎/‎2017 at 2:49 PM, ContractingPeoplesHatred said:

If I received a quote that outlines that the large business will do 99% of the work do I have anything to cite to throw them out?

Everything stated in this thread is factual and the answer is No nothing to cite to throw them out.   However you may want to consider the matter of  "Affiliation". 

As certification for a Federal procurement  occurs at time of offer and if in that offer the small business indicates that a large business will be doing 99% of the work a CO might be inclined to review the relationship of the SB to the LB to determine if there is the hint of affiliation. If affiliation seems to be present you may protest the contractors certification to SBA (FAR 19.302).

 

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In regard to affiliation, application of the ostensible subcontractor rule should be the first thing that gets examined.

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1 hour ago, Todd Davis said:

Thanks Don.  That makes sense since the prescription for the subcontracting limitation clause 52.219-14 states that it is not used for small business set asides not expected to exceed $150K.  Not sure why the FAR wouldn't state the nonmanufacturer rule does not apply for small business set aside actions not exceeding the $150K.  I know the FAR make reference to 13 CFR Part 121.  Since the OP comment said their action is a small business set aside, then I agree the nonmanufacturer rule does not apply.

Having said that, the exception seems to apply to small business set asides only and not to the other types of set asides under FAR Part 19.  I believe this is why the prescription is different for 52.219-14 when it comes to 8a procurements and why the subcontracting limitations and nonmanufacturer rule applicability is addressed in the other set aside clauses.  The prescription for these other set aside clauses are not dollar threshold dependent.  Do you see it the same way, or am I missing something?

According to the FAR Open cases report, an interim rule will be issued under FAR case 2016-011 that will implement the $150K exception to the nonmanufacturer rule. FAR 52.219-6 still references the $25,000 exception, so your advice to the OP about ensuring compliance with the nonmanufacturer rule is still good. I need to edit my response to you.

I agree that the limitations on subcontracting in the clauses for other set-asides (FAR 52.219-3, -27, -29, & -30) are not dependent on the dollar value of the acquisition.

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On 6/21/2017 at 6:16 PM, Don Mansfield said:

There's no limitation on subcontracting under $150K.

This is true insofar as we're talking about a contract (or purchase order) for services (or construction).  And as best as I can tell from the original posting, we are probably talking about a contract for services (or construction).

But I wouldn't want anyone to think that this same principle applies to a contract (or purchase order) for supplies.  In a contract for supplies that is a total small business set-aside, even a contract below the simplified acquisition threshold, the contract will include the clause at FAR 52.219-6, Notice of Total Small Business Set-Aside.  For a contract for supplies, paragraph (d) of that clause requires the contractor to furnish "only end items manufactured or produced by small business concerns in the United States or its outlying areas" except that if the total contract amount does not exceed $25,000, the contractor may furnish "the product of any domestic firm."

The original poster did say that 52.219-6 was included in his or her solicitation.  He or she did not clearly say that the acquisition was for services (or construction), although I assume it is because "a large business will do 99% of the work."

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2 minutes ago, ji20874 said:

This is true insofar as we're talking about a contract (or purchase order) for services (or construction).  And as best as I can tell from the original posting, we are probably talking about a contract for services (or construction).

But I wouldn't want anyone to think that this same principle applies to a contract (or purchase order) for supplies.  In a contract for supplies that is a total small business set-aside, even a contract below the simplified acquisition threshold, the contract will include the clause at FAR 52.219-6, Notice of Total Small Business Set-Aside.  For a contract for supplies, paragraph (d) of that clause requires the contractor to furnish "only end items manufactured or produced by small business concerns in the United States or its outlying areas" except that if the total contract amount does not exceed $25,000, the contractor may furnish "the product of any domestic firm."

Correct. I was editing my post when this post popped up.

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There are a lot of rabbit holes in our work.  :-)

Speaking of rabbit holes, and since we don't know if this is a construction acquisition, let me add that the fill-in to the clause at FAR 52.236-1, Performance of Work by the Contractor, might prohibit a large business (or any other subcontractor) from doing 99% of the work.

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