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.