Industry groups object to new SBA subcontracting proposal

A pair of industry groups are objecting to a proposed rule regarding subcontracting oversight beyond the first tier, claiming it adds an undue extra burden on companies and the federal system for collecting the data couldn't handle the influx anyway.

“Below the first tier, information on future competitive awards represents only blurry estimates of work scope and is thus mainly unusable for purposes of inclusion in the prime contractor’s pre-award individual contracting subcontracting plan,” the Council of Defense and Space Industry Association (CODSIA) wrote in response to SBA’s proposal. “The proposed rule demands data that does not exist in any consistent or reliable form.”

The Small Business Administration proposed a rule in October that prime contractors would include their lower tier subcontractors in their subcontracting goals. Prime contractors would have to incorporate any subcontracting work into the goal. Contractors would also have to monitor their subcontractors’ performance and compliance with meeting the goals and also setting goals before a contract is awarded.

“The proposed rule creates significant new responsibility and work for the prime contractor but does not offer clear or sufficient new incentives,” according to CODSIA’s letter.

The Professional Services Council, as part of CODSIA, wrote separately that SBA’s proposed rule misapplies the statute and creates new performance, oversight and compliance risk for companies. In addition, the government’s subcontracting compliance reporting frameworks would unable to handle the flood of data that the rule would require.

PSC noted in its comments the government’s Electronic Subcontracting Reporting System "is insufficiently scaled and not technically capable of capturing all the small business subcontract performance data.”

“While PSC has long supported the objective of capturing small business participation at all tiers of subcontracting, the proposed rule unnecessarily shifts significant burdens to prime contractors,” said Alan Chvotkin, PSC’s executive vice president and counsel.

SBA based the rule on National Defense Authorization Act for Fiscal Year 2014.

CODSIA’s letter requests that SBA significantly revise the proposed rule and hold off on implementation until the government changes its systems.

In essence, CODSIA wrote, “The proposed rule is simply not practical.”