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What SBA subcontracting limitations mean for your business

Final Ruling

In June 2016, the Small Business Administration (SBA) made a final ruling on provisions first set out in the National Defense Authorization Act (NDAA) of 2013. In the ruling, the SBA made an important decision on the limitations of subcontracting in small business set-aside contracts. Starting June 30th, 2016, any subcontracting by a prime small business contractor to a “similarly situated entity,” a small business which meets the same standards, will not be limited by subcontracting work requirement percentages set out by the specific set-aside type. EZGovOpps has the important details from this ruling to help any growing small business to understand the new implications.

In the 2013 NDAA, a limitation was placed in the Small Business Act on small business subcontracting for programs including 8(a). If a prime contractor is awarded a small business set-aside, that company would now be limited to subcontracting a maximum of 50% of funds for work to a subcontracting entity.  This was an attempt to limit the possible flow of work and funding from a small business prime contractor to a large business subcontractor. However, it was not until 2016 that the SBA was able to gather enough public input and decide on a final implementation on these limitations.

SBA Helping, Not Hindering, Small Business

Looking to maintain every advantage for small businesses in the federal contracting realm, and to keep from hurting small businesses who seek involvement in SBA programs and set-asides, the SBA ruled that while the 50% limitation would be placed on any large business subcontractor, it would not be placed on subcontracting to a “similarly situated entity.” If the subcontractor meets the small business standards under the NAICS code either for the prime contract or, importantly, the NAICS code that the prime decides is applicable to the subcontracting requirement, then this is not counted in the 50% contracting limitation. However, this “similarly situated entity” allowance only counts towards a first-tier subcontractor. Any work performed below the first level subcontractor is placed under the new NDAA limitations.

The SBA also made an important ruling on the 8(a) mentor-protégé relationships and joint ventures as they relate to small business proposals. The SBA will now allow joint ventures and 8(a) mentor-protégé partners to qualify as a small business venture for procurement, if both entities separately meet small business size requirements.

Looking for possible joint venture partners, or an 8(a) mentor for your small business? EZGovOpps can help you search for potential partners by NAICS code and location and evaluate prospective set-aside contracts in the federal contracting market. In only 60 seconds, you will have access to a wealth of market intelligence that can only help your company succeed.

Don’t forget to view our full GovCon News section for more intel.

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