House Passes Bill Increasing Importance of Subcontracting Plan Performance as an Evaluation Factor

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PilieroMazza PLLCOn June 8, 2022, the U.S. House of Representatives passed a bill, referred to as H.R. 7694, “Strengthening Subcontracting for Small Businesses Act of 2022” (the Bill). The Bill seeks to amend the Small Business Act by requiring federal agencies to more broadly consider the content of subcontracting plans and subcontracting plan performance when evaluating large businesses for federal contracts. If enacted, the Bill should encourage large businesses to subcontract more work to small businesses and to achieve their small business subcontracting goals.

As it stands, the Small Business Act requires that when evaluating offers from large businesses, federal agencies consider as significant factors, in certain circumstances: (1) the rate provided under the offeror’s subcontracting plan for small business participation and (2) when evaluating past performance, the extent to which the offeror attained its small business participation goals during performance. These requirements, however, are narrow in scope. Indeed, federal agencies are only instructed to consider these factors when evaluating offers for bundled contracts after the agency determines that the contract offers a “significant opportunity for subcontracting.” The Bill broadens the application of these factors in two critical ways. 

First, the Bill requires that federal agencies consider these evaluation factors when evaluating offers for any contract that requires a subcontracting plan, and not simply for bundled contracts with a significant opportunity for subcontracting. Second, rather than simply requiring federal agencies to evaluate the rate of small business participation promoted in an offeror’s subcontracting plan, the Bill requires federal agencies to evaluate the description in the offeror’s subcontracting plan of the extent to which it proposes to use small business subcontractors, at any tier.

Although subcontracting can be an excellent opportunity for small businesses to enter and grow in the federal marketplace, there is concern in the industry that large businesses do not always achieve their small business goals and that when they fail to do so, small businesses are the ones that truly suffer.  By requiring agencies, when evaluating any offer for a contract that requires a subcontracting plan (i.e., generally speaking, any contract to a large business with a value over $750,000 or $1.5 million for construction), to meaningfully consider the content of an offeror’s subcontracting plan—and not merely its aspirational goals—and the extent to which the offeror attained its small business goals in the past, the Bill provides much needed transparency and oversight in the area of small business subcontracting. Moreover, because the Bill makes subcontracting plans and subcontracting plan performance significant evaluation factors for large businesses, it should incentivize large businesses to meaningfully utilize small business subcontractors and to achieve their small business goals.    

The Bill was referred to the United States Senate for consideration.  If you want to show your support for the Bill, we encourage you to complete this form by Friday, June 24th so your company can be included in a list of endorsers being gathered by the Montgomery County Chamber of Commerce.  You can also contact one of your state’s U.S. Senators to express your position on the Bill.    

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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