Credit for Lower-Tier Small Business Subcontracting

On August 26, AGC of America submitted comments to the Federal Acquisition Regulation (FAR) Council in response to its Notice of Proposed Rulemaking for Prime Contractors to receive credit for lower-tier small business subcontracting goals. The association noted its concerns about the proposed requirements and urged the FAR Council and the U.S. Small Business Administration (SBA) to significantly revise the proposed rule to align with Sec. 1614 of 2014 National Defense Authorization Act (NDAA) and not create a second additional small business goal for lower-tier subcontractors. 

Before 2014, federal regulations restricted non-small prime contractors from counting and receiving credit for the first-tier small business subcontracts towards their overall small business subcontracting goals. In 2014, Congress included Section 1614 of the National Defense Authorization Act for Fiscal Year 2014, which directed federal agencies to allow non-small prime contractors with individual prime contracts to take credit for small business subcontracts at all tiers towards small business subcontracting goals. Consequently, the FAR Council—as the SBA in its preceding 2016 rulemaking—incorrectly interpreted Sec. 1614 of 2014 NDAA and the existing provisions within the Small Business Act by effectively establishing two small business subcontracting goals—one at the first tier and one at lower-tiers. In its comments, AGC urges the FAR Council and SBA to issue significant revisions of the rule or give contractors the option to elect or not elect to participate in to receive credit for lower-tier subcontracting of small businesses.

AGC will continue to provide input to the FAR Council and SBA on the impact further changes might have on the construction industry and will notify members of any developments.  

Contact Jordan Howard for more information.