Subcontracting Plans
Diane G. Dempsey
BAE Systems
Intelligence & Security Sector
Subcontracting Plans - Purpose
• To provide your customer with your intent to
subcontract to small business. The
subcontracting plan is a document that is
typically incorporated into your contract with
your customer.
• Statutory requirements: required in support of
federal/state/local government contracts
• Corporate policy – internal goals set by the
corporation
Commercial-Industry Subcontracting
Plan Content
• Corporate policy – internal goals set by the corporation
– consumer facing organizations
• Typically includes the corporate policy relating to small
business utilization.
• Is not as complex as those required by governments –
local/state/federal
• Includes a goal, does not always include the anticipated
dollars to be awarded.
• Majority of industry Subk Plans focus on MBE/WBEs
• Internal audits may be conducted – good business
U.S. Government Regulations
• Federal Acquisition Regulations Subpart 19.7
• The Small Business Subcontracting Program states that
any contract exceeding $650,000.00 issued to a large
business (small businesses are exempt) requires a
subcontracting plan. A Subcontracting Plan must
include elements as defined following; however,
customers may add requirements to this list.
• FAR Clauses 52.219 is a companion to FAR Subpart
19.7, providing definition to this requirement.
Federal Subcontracting Plans
Four types of Subcontracting Plans:
• 1. Individual Subcontracting Plan [FAR
19.704(a)]
• 2. Master Subcontracting Plan [FAR
19.704(b)]
• 3. Commercial Subcontracting Plan [FAR
19.704(d)]
• 4. Comprehensive Subcontracting Plan
[DFARS 219.702(1)]
Federal Subk Plan Content
Statutory requirements: required in support of
federal/state/local government contracts
For federal contracts:
• Must be IAW FAR 52.219-9
• Breaks our the goals and dollars that will achieved in
the base and option years of the contract
• Requires semi-annual (ISRs)and annual reporting
(SSRs)
• Audits are conducted to ensure compliance –
annual/bi-annual (2 yrs) or tri-annual (3 yrs)
• Outreach is required.
Individual Subcontracting Plan
• Subcontracting Plan that covers the entire contract
period, including option periods, applies to a specific
contract, and includes the goals that are based on
Offeror’s projections for subcontracting. Regulations
concerning the Individual Subcontracting Plan are
detailed in the FAR 19.704(a).
• The Individual Subcontracting Plan may also include
indirect costs in establishing subcontracting goals. In
such case, the Plan must include a statement
showing how the proportional share of these costs is
allocated to the SB, VOSB, SDVOSB, HUBZone SB, SDB
and WOSB (FAR 19.704(a)(6).
Elements - Goals
• Goals - Total dollars planned to be subcontracted to each group.
• Goals should be stated in both dollars ($) and percentages (%).
• The contractor must state the total subcontracting dollars, and
then state separately the total dollars that will be subcontracted
to SB, SDB, WOSB, HUBZone SB, VOSB, HBCU and SD/VOSB.
• The SB dollar amount must include all the small business subset
amounts. **The percentages must be expressed as percentages
of the total contract dollars OR total subcontracting dollars.
• In the case of total contract amount, both should be reflected.
Goals for option years must be broken out separately.
Elements – Products & Services
• A description of the types of supplies and services to
be subcontracted to each group, including the
supplies and services to be subcontracted to OTSB
(LB) subcontractors. Customers may require the
names of the suppliers. Illustrative sample:
Elements – cont.
• A description of the method used to develop each of
the goals.
• A description of the method used to identify potential
sources.
• A statement as to whether or not indirect costs were
included in the subcontracting goals.
• Some solicitations will require that goals are expressed
as a percentage of the total contract value rather than
as a percentage of total subcontract value. In this
instance, SBA prefers that the plan expresses goals
both as a percentage of contract value and as a
Elements – cont.
Element 2 cont.
The Plan Administrator
• The name of the Administrator of the Subcontracting Plan
and a description of his/her duties.
• Element 3 - Efforts to Ensure Equitable Opportunities
• A description of the efforts the company will make to
ensure that SB, SDB, WOSB, VOSB, SD/VOSB, and HUBZone
SB concerns will have an equitable opportunity to compete
for subcontracts.
• Element 4 – Flow-Down Requirements –Assurances that
the large business will “flow-down” the subcontracting
requirements to its large business subcontractors unless
the plan is a Commercial Subcontracting Plan.
Elements – cont.
Element 5 - Assurances to Cooperate in Studies and Submit
Reports
• Assurances that the company will cooperate in any studies or
surveys as may be required, and submit periodic reports in
order to allow the government to determine the extent of
compliance by the company with the Subcontracting Plan.
Assurances that its subcontractors agree to submit required
reports.
Element 6 - Internal Recordkeeping
• A recitation of the types of records the company will maintain
to demonstrate its compliance with the Subcontracting Plan.
(See Appendix D, Sample Documentation Form for
Liquidated Damages
• If the prime contractor does not meet it’s
goals it can be subject to liquidated damages.
• LD is difficult to assess if the prime contractor
has demonstrated good faith efforts to meet
it’s goals:
– Participates in SB outreach events
– Solicits SBs for subcontracting purposes
– Conducts market research to identify qualified SBs
for subcontracting opportunities.
Master Subcontracting Plan
• A Master Plan is a general Subcontracting Plan that does not refer
to a specific project or contract. It describes the contractor’s
(non-specific) Small Business Subcontracting Plans and includes all the
elements of the Individual Subcontracting Plan EXCEPT goals.
• The contracting organization may establish a Master Plan that, once
approved by the Administrative Contracting Officer (ACO), will be
effective for three years. The Master Plan is addressed in the FAR
19.704(b), which continues and states: “…However, it is incumbent
upon contractors to maintain and update master plans. Changes
required to update master plans are not effective until approved by
the contracting officer.”
• Once approved by the Contracting Officer, a Master Plan can be
incorporated into an Individual Plan.
Commercial Subcontracting Plan
• A Commercial Plan is a Subcontracting Plan that covers the Offeror’s fiscal year and applies to the organization’s entire production of commercial items sold. Unlike the Master Plan, Commercial plan does include goals, and is the preferred type of Subcontracting Plan for contractors furnishing commercial items.
• The Commercial Plan is not contract-specific; rather, it is effective for all government contracts for the duration of the organization’s fiscal year. The plan is negotiated with the Contracting Officer of the first agency with
which the organization has an Individual Plan or with the first Prime Contractor with which the organization contracts.
• Thirty (30) working days before the end of the fiscal year, the organization should submit a new Commercial Plan to the Contracting Officer
responsible for the ongoing contract, with the latest completion date.
• The Commercial Plan is not reviewed or accepted by the Defense Contract Management Agency (DCMA). It is reviewed, negotiated and approved by the Contracting Officer responsible for the current contract. The plan is addressed in the FAR 19.704(d).
• Commercial Products are defined as those products that are in regular production, and are sold competitively in substantial quantities to the
general public and/or to industry. Commercial products are usually sold at established catalog or market prices.
• When preparing the Subcontracting Plan, one should be able to identify commercial products.
Comprehensive Subcontracting Plan
• Comprehensive Subcontracting Plan Test
Program is not accepting additional
participants
Participant requirements:
• Performed three (3) DoD contracts (supplies
and services) totaling at least $5 million, and
• Has met or exceeded an SDB subcontracting
goal of 5%.
Establishing Subcontracting Goals
• Commercial companies can establish goals based
on procurement history, market research and
benchmarking with their industry.
• Government goals are established by statute and
vary at the federal, state and local levels.
• The federal government has varying goals.
– SBA sets government wide goals
– Civilian agencies establish their individual goals
– DOD sets forth a goal every year and the departments
within DOD set their individual goals
Federal Small Business Goals
• SB - Small Business
• 23% Goal.
• Must meet FAR Size Standards.
• SDB - Small Disadvantaged Business
• 5% Goal. Includes Alaskian Native Corp. (ANCs), Native
–Owned (Native American Indian, Alaskian &
Hawaiian)and HBCU/Mis****
• Owned & Controlled by socially and economically
disadvantaged individuals.
• 8(a)Certified Small Business
• SDB (WOSB can be SDB) with additional certification
through SBA.
• Eligible for set aside contracts 8(a) firms are SDB; SDB’s
are not necessarily 8(a).
Fed SB Goals – cont.
• WOSB - Woman-Owned Small Business
– 5% Goal
– Self Certification: 51% woman/woman ownership & controlled.
• HUBZone - Historically Underutilized Business Zone
– Small Business Concern - 3% goal.
– Principal place of business must be located in and 35% of
employees must line in a HUBZone designated area.
– Must be SBA certified.
• Veteran-Owned Firm - SB owned & controlled by veteran
– 3% goal for veteran-owned small business.
– SB 51% owned and controlled by veteran(s).
Fed. SB Goals – cont.
• Service Disabled Veteran-Owned firms
– SB 51% owned and controlled by service disabled
veteran(s).
– 3% goal.
• GOALS MAY BE HIGHER BASED ON CUSTOMER
REQUIREMENTS.
• ***Companies qualify as small business under
the NAICS Code that is designated for the work
being performed.
Dept. of Defense SB Goals
• DOD changes its subcontracting goals every year.
• 2015 Subcontracting Goals:
• Small Business: 36.0%
• Small Disadvantaged: 5.0%
• Woman-Owned: 5.0%
• HUBZone: 3.0%
• Veteran-Owned – no statutory goal
Calculating Goals
• We are subcontracting to one LB and one SDB/WOSB/Hubz. Goals will be calculated as follows: Dollars Percentages • Small Business $1.00 33% • Large Business $2.00 66% • Total Subcontracting $3.00 100% • SDB $1.00 33% • WOSB $1.00 33% • HUBZone $ 1.00 33% • VOSB $ 0 0%*** • SDVOSB $ 0 0% **Can be reported for civilian contracts.
Companies should set reasonable and achievable subk goals. They can
achieve the goals set by governments; however, companies are encouraged to set goals they can meet - DO NOT OVERPROPOSE. Is this compliant?
Calculating goals – cont.
• We are subcontracting $1.00 to Four SBs:
1 - SDB/WOSB/SDVOSB, 1 - WOSB/VOSB, 1 - HUBZone & 1
-SDVOSB/HUBZone. Goals will be calculated as follows:
• Small Business
$4.00
100%
• Large Business
$0.00
0%
• Total Subcontracting
$4.00
100%
• SDB
$1.00
25%
• WOSB
$2.00
50%
• HUBZone
$2.00
50%
• VOSB
$3.00** 75%
• SDVOSB
$2.00 50%
Calculating Goals, cont.
We are subcontracting $1.00 to One LB. We are also subcontracting $1.00 to three SBs to the US Army: One WOSB/Native American SB, one Service
Disabled Veteran-Owned SB & One WOSB. Goals will be calculated as follows: • Small Business $4.00 80% • Large Business $1.00 20% • Total Subcontracting $5.00 100% • SDB $1.00 20% • WOSB $2.00 40% • HUBZone $0 0% • SDVOSB $1.00 20% **. DOD does not recognize VOSB, only SDVOSB.
