New contracting threshold could harm small businesses

Regulatory councils increased the minimum amount at which a company must draw up a subcontracting plan

Changes to contracting thresholds might cut into small businesses' opportunities when the new federal fiscal year begins because regulators have increased the minimum cost required for subcontracting plans, according to Guy Timberlake, CEO and chief visionary of the American Small Business Coalition.

Regulators raised the minimum amount at which a prime contractor must have a subcontracting plan from $550,000 to $650,000 beginning Oct. 1, the start of fiscal 2011.

The increase gives prime contractors more cushioning to avoid partnering with small businesses, Timberlake wrote Sept. 4 on his blog The Chief Visionary Blog.

“Apparently, many companies, subject to small-business subcontracting, view it in the same light as taking 40 lashes in the town square,” Timberlake wrote.

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council proposed the changes in February and finalized the new rule in the Aug. 30 issue of the Federal Register. The changes were a combination of increases to the simplified acquisition threshold and the prime contractor subcontracting threshold.

The councils explained the change by saying they want to keep things steady. They reiterated in the notice that "adjusting a threshold in an amount sufficient to keep pace with current inflation is neutral in impact on small businesses because it just maintains the status quo."

The law limits increases relative to inflation.

In reaction to the proposal, some respondents said they supported the $100,000 increase and suggested raising the threshold.

The councils wrote that respondents consider the current threshold to be administratively burdensome.

One writer suggested boosting it to $700,000 to offset the expense of reporting additional data on pricing and costs. Another recommended raising the minimum threshold to $1 million through legislation, according to the notice.

On the opposite side, others objected to the increased subcontracting threshold because small businesses are most often subcontractors.

The $100,000 increase is “a considerable jump and significant amount of lost opportunities had the increase been smaller,” Timberlake wrote.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Fri, Sep 10, 2010

Working for one of the larger federal contractors doing subcontractor plans, the $100K increase will likely have a neglible impact. If a subcontractor truly provides a niche technical or managerial benefit, they will be used. In other words, if they have a value-add, other than just making sub-k % numbers, which costs the taxpayer more, then it is a win-win.

Thu, Sep 9, 2010

Cutting out the small business may put more money in yout pocket short term, but do you realize you are KILLING THE COUNTRY and the FUTURE by doing so? Small Businesses are our Nations backbone, and you are slowly removing our spine by sneaky tactics to make it harder for us to compete.

Thu, Sep 9, 2010 Jaime Gracia Washington, DC

Government finds subcontracting plans burdensome, so less administration is better. Large businesses would rather keep the business for themselves, especially in a time of shrinking budgets and deficits. Seems like it is win-win for everybody except small businesses, as they get left holding the bag as subcontracting is normally how small businesses tend to get started and grow. Disappointing.

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