By: Cordell Parvin
Contractors constructing projects for the federal government
are likely familiar with the subcontracting plans requirement. Contractors who
focus on state and local government proj-ects also should become familiar with
the requirements since they may be implemented in the future. The requirements
discussed below may seem arduous and time-consuming, but successfully
fulfilling them is a prerequisite for contract award.
The detailed list
Contractors that receive a $1 million contract or more must
submit a subcontracting plan. A subcontracting plan details the efforts the
contractor will make to assure that small businesses, small disadvantaged
businesses, women-owned small businesses and HUBZone small businesses
(businesses located in historically underutilized business zones) will have an
equal opportunity to compete for subcontracts. Failure to submit a
subcontracting plan makes the contractor ineligible for award. In addition, any
contractor who fails to comply in good faith with the requirements of the
subcontracting plan is in material breach of the contract.
Subcontracting plans are very detailed. They must include
separate percentage goals for using each category of minority business
concerns; the total dollars planned to be subcontracted and the total dollars
planned to be subcontracted to each category or minority business concern
separately stated; a description of the principal types of supplies and
services to be subcontracted and an identification of the types planned for
subcontracting to each category of minority business concern separately stated;
a description of the method used to develop the subcontracting goals; a
description of the method used to identify potential sources for solicitation
purposes; whether or not the offeror included indirect costs in establishing
subcontracting goals and a description of the method used to determine the
proportionate share of indirect costs to be incurred with each category of
minority business concern; the name of the individual who will administer the
offeror's subcontracting program; a description of the efforts the offeror will
make to ensure that each category of minority business concern has an equitable
opportunity to compete for subcontracts; a description of the types of records
that will be maintained concerning procedures that have been adopted to comply with
the requirements and goals of the subcontracting plan, including establishing
source lists; and a description of the offeror's efforts to locate each
category of minority business concern.
Let's have a good effort
FAR 19.701 identifies three different types of
subcontracting plans: individual, master and commercial. An individual plan is
a subcontracting plan that covers the entire contract period (including option
periods), applies to a specific contract and has goals that are based on the
offeror's planned subcontracting in support of the specific contract, except
that indirect costs incurred for common or joint purposes may be allocated on a
prorated basis to the contract.
A master plan is a subcontracting plan that contains all the
required elements of an individual plan, except subcontracting goals, which
applies to all subcontracts issued for three years from the date of approval.
An approved master plan may be incorporated into individual contract plans.
A commercial plan is a subcontracting plan, including goals,
that covers the offeror's fiscal year and applies to the entire production of
commercial items sold by the company or a portion thereof. For contractors
furnishing commercial items, a commercial plan is the preferred type of
subcontracting plan.
In addition to being in material breach of the contract, a
contractor's failure to make a good faith effort to comply with a
subcontracting plan subjects the contractor to liquidated damages. The amount
of damages is measured by the actual dollar amount by which the contractor
failed to achieve each subcontracting goal.
The determination of whether a contractor failed to make a
good faith effort is based upon "the totality of the contractor's actions,
consistent with the information and assurances provided in its plan." A
contractor's failure to meet subcontracting goals does not, in and of itself,
constitute a failure to make a good faith effort.
Contractors must learn how to put together and present their
subcontracting plans and then make sure their construction team makes a good
faith effort to comply with the plan.
