Proposed rule allows counting of lower-tier subcontracting against primes’ plans

The Small Business Administration has proposed a rule to count lower-tier subcontracting against primes’ socioeconomic goals in their subcontracting plans. As a reminder, these plans may be contract-specific, apply across an IDIQ and all its orders, or be companywide. Currently, primes report subcontracting against the socioeconomic categories for their first-tier subcontractors, which are tracked against their plans.

Under the proposed rule, rather than counting socioeconomic subcontracting amounts at the first-tier only, primes could take credit for subs further down the supply chain, that is, the subcontractors of subcontractors.

This may be particularly attractive for a large subcontractor that utilizes 1099s, for example, each of whose small or small disadvantaged status would now flow up through their large-business prime.

There’s no downside here for small business, as subcontract reporting stops at a first-tier subcontractor without a small-business subcontracting plan. In other words, agencies continue to receive credit for all spend to a small or socioeconomically disadvantaged contractor, regardless of whether some of that spend is subcontracted.

Comments are open!