On Nov. 29, the Small Business Administration issued a final rule that will implement several provisions of the National Defense Authorization Acts of 2016 and 2017 and of the “RISE Act” of 2015, as well as other clarifying amendments. As we outlined nearly a year ago when the rule was first proposed, these changes address key small business issues for government contractors, including: subcontracting plans, the nonmanufacturer rule (NMR); Information Technology Value-Added Resellers (ITVARs); limitations on subcontracting, recertification, size determinations and the ostensible subcontractor rule. Below, we summarize fundamental revisions, which take effect on Dec. 30, 2019.

Subcontracting Plans -

Consistent with the 2017 NDAA, the rule provides that it will be a material breach of contract when a contractor or subcontractor fails to comply in good faith with its subcontracting plan requirements, including failing to provide reports and/or cooperate in studies or surveys to determine the extent of compliance. The rule provides a number of examples of what constitutes a failure to make good faith efforts, including, among others, (1) failing to timely submit subcontracting reports and (2) failing to pay small business subcontractors in accordance with the terms of the contract. SBA states that those examples are not intended to be inclusive and other factors may be considered. The rule also provides that failure to make a good-faith effort may be considered in any past performance evaluation of the contractor.