As a GSA contractor, odds are that you have come across subcontracting requirements and processes. GSA’s subcontracting requirements were created to help government agencies meet their small business spending budgets each fiscal year, whether directly or indirectly. Within the scope of subcontracting, there are many intricacies, but we have put together a blog to cover the basics of GSA subcontracting.
What is Subcontracting?
Before we launch into the rules of subcontracting, you should understand the basics of what subcontracting is and when it's required. "Other than Small Businesses" (OTSBs) that hold a contract over the Simplified Acquisition Threshold (SAT) are required to submit a subcontracting plan detailing how they plan to subcontract a portion of their work out to small businesses. In other words, this plan covers exactly how you want to allocate your contract requirements between your company and subcontractor(s). A small business subcontracting plan helps you track and meet your subcontracting goals because you have to set-aside a dollar estimate for small businesses before you begin working on your contract.
We'll cover how to determine whether a business is small or "Other than Small" below.
Small Business Administration (SBA) Size Standards
It's important to understand how the government determines a small business vs. an "Other than Small Business" (OTSB). The Small Business Administration (SBA) establishes the government’s definition of business size using OMB-approved industry NAICS Codes and their associated size standards. These size standards are based on a company’s 12-month average number of employees or average annual receipts over the past five years, which should be updated in SAM.gov annually.
It's important to note that these size standards have been revised recently for several NAICS Codes, so some middle-sized businesses may qualify as small now.
Companies should also ensure that all small business socio-economic categories are accurately represented in SAM.gov, including the following: Small Disadvantaged (SDB), Women-Owned Small Business (WOSB), Economically Disadvantaged Women-Owned Small Business (EDWOSB), Veteran-Owned Small Business (VOSB), Service-Disabled Veteran-Owned (SDVOSB), HUBZone or 8(a). Many companies have multiple NAICS Codes listed in their SAM account.
You may have noticed that the same company can be considered an “Other Than Small Business" under one NAICS Code, but a small business under another – GSA Schedule contractors must choose a preponderance of work, or primary NAICS Code, when obtaining a GSA Schedule contract. This NAICS Code should represent the industry which comprises the majority of the firm’s business under the GSA Schedule. So, it's really important which NAICS Code you choose.
How Small Business Subcontracting Plans Work
According to the Federal Acquisition Regular (FAR )19.702, generally any large contractor receiving a contract with a value greater than the Simplified Acquisition Threshold (SAT) must accept in the contract that small businesses will have maximum practicable opportunity to participate in contract performance.
Specifically for GSA contractors, if your business is considered an "Other than Small Business" under the primary NAICS Code as defined by GSA, and if your estimated GSA contract value exceeds $700,000 ($1.5 million for construction), then you are required to submit a subcontracting plan for the contract if the Contracting Officer determines that subcontracting opportunities exist.
Developing a Small Business Subcontracting Plan
When developing a small business subcontracting plan specific to your GSA Schedule contract, there are two types of plans to choose from: commercial and individual. GSA has published a subcontracting plan template for offerors, which can be found on GSA’s Available Offerings and Requirements website page.
The commercial subcontracting plan includes planned subcontracting for both commercial and government business, not just a single agency like GSA. The commercial plan only covers the company’s fiscal year and must be revised and approved each year. The revised plan is due 30 working days before the plan’s expiration date. This type of plan is often utilized by contractors who are including more than one company within the corporation under the coverage of the plan.
The individual subcontracting plan applies specifically to the single GSA contract and covers the entire contract period, including all options whether exercised or not. This type of plan includes goals that are based on the contractor’s planned subcontracting (and purchasing) in support of the GSA contract itself.
Meeting Subcontracting Goals
Individual and commercial small business subcontracting plans should include goals for dollars spent with small business, VOSB, SDVOSB, HUBZone, SDB (including ANCs and Indians Tribes) and WOSB. Your goals should be realistic but also reflect best faith efforts to exceed the minimum. The goals should include an estimate of total dollars to be spent on outsourcing, purchases, or spend over the period covered by the type of plan selected (individual or commercial).
Subcontracting Tracking
All GSA contractors with an active small business subcontracting plan are required to comply with tracking and reporting requirements. Throughout the year, contractors should be accurately tracking the business size status of all applicable subcontracting expenses. It's a good idea to implement internal company processes to determine the business size of each potential subcontractor/ vendor at the onset of the relationship.
Often, companies will use the small business representations made in SAM.gov to determine socio-economic business size status, which is totally acceptable. However, if the vendor does not have a SAM record, there are multiple other ways to determine size status, such as veterans service organizations, the National Minority Purchasing Council Vendor Information Service, the Research and Information Division of the Minority Business Development Agency in the Department of Commerce, or small, HUBZone, small disadvantaged, and Women-Owned Small Business trade associations. Companies will also often use some version of a vendor self-certification form to determine the business size status of their vendors.
Subcontracting Reporting
Regardless of the plan you choose, you are required to comply with subcontracting reporting requirements. Contractors with a commercial subcontracting plan are only required to report one Summary Subcontract Report per year for the period of October 1 through September 30, which is due to eSRS by October 30 of each year. Contractors with an individual subcontracting plan are required to file two cumulative Individual Subcontracting Reports (ISRs) and one Summary Subcontracting Report (SSR) each year.
The first ISR is for the period of October 1 – March 31 and is due by April 30. The second ISR is for the period of April 1 – September 30 and is due on October 30. The Summary Subcontracting Report is for the period of October 1 through September 30 and is also due on October 30.
Are You Keeping Up with GSA Subcontracting Requirements?
Subcontracting requirements are meant to offer small businesses access to greater opportunities in the federal marketplace. Small businesses have access to small business set-asides and assistance programs that mid to large businesses do not.
Are you a small business looking for advice on taking advantage of small business set-aside goals or subcontracting opportunities? Are you a mid-sized to large business looking for assistance developing or managing your small business subcontracting plan? Either way, Winvale can help! Contact one of our consultants today.
