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News & Press: WIPP Legislative Updates

Making It Count: New Subcontracting Small Business Rules Proposed

Monday, October 26, 2015  
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Making It Count: New Subcontracting Small Business Rules Proposed


Prime contractors are required to track dollars spent with small businesses but have been unable to count all subcontracted businesses involved in projects. How could this be? According to SBA regulations, only small businesses directly subcontracted from the prime, known as “first tier,” or directly subcontracted from other small businesses counted toward these goals. This meant that some second and third tier small business subcontractors were eliminated from the totals – removing incentives to work with small businesses throughout the supply chain. Another issue was that first tier small businesses could subcontract out all work to a large second tier and be counted toward the goal.


The 2014 National Defense Authorization Act attempted to change this subcontracting dynamic. SBA proposed rules in early October to implement this change. First, the new rule allows small businesses at any tier to be counted toward goals. Second, it establishes small business subcontracting goals for first tier subcontractors, requiring primes to think about small business inclusion at every level of the contract. Third, it requires primes to list a size standard based on NAICS codes in subcontracting solicitations.


These clarifications are intended to create a more accurate picture of the presence of small businesses in subcontracting. Comments on the proposed rule must be submitted here by December 7th, 2015.

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