[Federal Register Volume 60, Number 25 (Tuesday, February 7, 1995)]
[Notices]
[Pages 7227-7229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2912]



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[[Page 7228]]

OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy


Policy Letter on Subcontracting Plans for Companies Supplying 
Commercial Items

AGENCY: Office of Federal Procurement Policy, OMB.

ACTION: The Office of Federal Procurement Policy (OFPP) is requesting 
comments on a proposed policy letter on subcontracting plans for 
companies supplying commercial items.

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SUMMARY: Section 8(d) of the Small Business Act (15 U.S.C. 637(d)) 
requires that each contract that exceeds $500,000 ($1 million in the 
case of construction), and that offers subcontracting opportunities, 
include a requirement that the apparent successful offeror negotiate a 
subcontracting plan which shall become a material part of the contract. 
These requirements have been implemented by prior OFPP Policy Letters 
and subsequent promulgation in the Federal Acquisition Regulation 
(FAR).
    Sections 8104 and 8203 of the Federal Acquisition Streamlining Act 
of 1994 (FASA), Public Law 103-355, establish a preference for the 
acquisition of commercial items. In establishing this preference, 
Congress expressed concern that implementing policies ease the burden 
of government-unique requirements for companies supplying commercial 
items. In response to this concern, the policy on subcontracting plans 
is being revised to reduce the burden of government-unique requirements 
on contractors that supply commercial items.
    This proposed Policy Letter focuses on contracts and subcontracts 
for ``commercial items'' as defined in section 8001 of FASA. Annual, 
commercial company-wide, division-wide, or plant-wide, subcontracting 
plans that relate to a company's commercial and noncommercial 
production are authorized for:
    (a) Prime contracts for commercial items, or
    (b) Subcontractors that provide commercial items under a prime 
contract, whether or not the prime contractor is supplying a commercial 
item.
    In addition, the proposed Policy Letter states that commercial 
company-wide plans, when authorized under the Policy Letter, shall be 
the preferred method of compliance with the requirements of section 
8(d) of the Small Business Act. The policy letter reinforces that these 
provisions for subcontracting plans for commercial item contractors do 
not in any way relieve contracting officers, prime contractors or 
subcontractors of their responsibilities for assuring that small, small 
disadvantaged, and women-owned small businesses have the maximum 
practicable opportunity to participate in contracts awarded by Federal 
agencies.

COMMENT DATE: Comments must be received on or before April 10, 1995.

ADDRESSES: Comments should be submitted to William Coleman, Deputy 
Administrator, Office of Federal Procurement Policy, New Executive 
Office Building, Room 9013, 725 17th Street NW., Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT:
William Coleman, Deputy Administrator, 202-395-3503.
Steven Kelman,
Administrator.
Policy Letter 95-
To The Heads of Executive Departments and Establishments
Subject: Subcontracting Plans for Companies Supplying Commercial 
Items

    1. Purpose. The purpose of this Policy Letter is to establish 
policies on the requirement for subcontracting plans for companies 
supplying commercial items.
    2. Authority. This Policy Letter is issued pursuant to section 6 
of the Office of Federal Procurement Policy Act, as amended, 41 
U.S.C. 405.
    3. Background. Section 8(d) of the Small Business Act (15 U.S.C. 
637(d)) requires that each contract that exceeds $500,000 ($1 
million in the case of construction), and that offers subcontracting 
opportunities, include a requirement that the apparent successful 
offeror negotiate a subcontracting plan which shall become a 
material part of the contract. The requirement for subcontracting 
plans does not apply to small businesses. The above requirements 
have been implemented by OFPP Policy Letter 80-2 ``Regulatory 
Guidance on Section 211 of Public Law 95-507'' dated April 29, 1980, 
and Supplement No. 1 dated May 29, 1981, and further implemented in 
part 19 of the Federal Acquisition Regulation (FAR). That Policy 
Letter specifically authorized the use of a company-wide annual 
subcontracting plan that relates to the contractor's commercial and 
noncommercial production when the government is acquiring a 
commercial product.
    Sections 8104 and 8203 of the Federal Acquisition Streamlining 
Act of 1994 (FASA), Public Law 103-355, establish a preference for 
the acquisition of commercial items by the Department of Defense and 
civilian agencies. In establishing this preference, Congress 
expressed concern that implementing policies ease the burden of 
government-unique requirements for companies supplying commercial 
items. The Conference Report (H.R. 103-712) recognizes the unique 
circumstance faced by commercial contractors and the specific 
authority already provided in regulation and policy for company-wide 
plans rather than contract-by-contract plans.
    The report cites OFPP Policy Letter 80-2, FAR 52.219-9(g), and 
519.704(b) of the General Services Administration Acquisition 
Regulation which provide express authority for company-wide, 
division-wide or plant-wide plans. The Report states:
    Because contractors and subcontractors offering commercial items 
tend to rely on their existing network of suppliers rather than 
entering new subcontracts to fill government orders, the 
requirements applicable to the company-wide subcontracting plans of 
commercial companies differ from the requirements applicable to 
individual subcontracting plans of noncommercial companies. See e.g. 
sections 519.704(c)(2), 519.705-5 and 519.705-6(b) of the GSA FAR 
Supplement. For example, a single company-wide plan authorized by 
these regulations is likely to address subcontracting opportunities 
at both the prime contract and subcontract levels, obviating the 
need for the filing of individual contract-by-contract or 
subcontract-by-subcontract plans. Title VIII of the bill is not 
intended to require any changes to such practices.'' (emphasis 
added)
    In response to this concern, the policy on subcontracting plans 
is being revised to reduce the burdens of government-unique 
requirements on contractors that supply commercial items.
    4. Policy. The following policy applies to contracts and 
subcontracts for ``commercial items'' as defined in section 8001 of 
FASA. (1) It is a fundamental policy of the Federal Government that 
a fair proportion of its contracts be placed with small businesses, 
small businesses owned and controlled by socially and economically 
disadvantaged individuals, and small businesses owned and controlled 
by women and that such businesses participate in subcontracting 
under government prime contracts.
    (2) When the requirements for a subcontracting plan under 
section 8(d) of the Small Business Act apply, annual, commercial 
company-wide, division-wide, or plant-wide subcontracting plans that 
relate to a company's commercial and noncommercial production are 
authorized for:
    (a) Prime contracts for commercial items, or
    (b) Subcontractors that provide commercial items under a prime 
contract, whether or not the prime contractor is supplying a 
commercial item.
    (3) Furthermore, it is the policy of the United States 
Government that commercial company-wide plans, when authorized under 
this Policy Letter, shall be the preferred method of compliance with 
the requirements of section 8(d) of the Small Business Act. In all 
solicitations expected to offer subcontracting opportunities which 
trigger the requirements for a subcontracting plan, the Government 
shall inform prospective offerors of the opportunity for themselves 
and/or their subcontractors to develop commercial company-wide plans 
if they are supplying commercial items. This would apply whether or 
not the prime contractor is supplying a commercial 
item. [[Page 7229]] 
    (4) This policy is in addition to the existing policies cited in 
paragraph 3 of this Policy Letter.
    (5) These provisions for subcontracting plans for commercial 
item contractors do not in any way relieve contracting officers, 
prime contractors or subcontractors of their responsibilities for 
assuring that small, small disadvantaged and women-owned small 
businesses have the maximum practicable opportunity to participate 
in contracts awarded by Federal agencies.
    5. Responsibilities. The Federal Acquisition Regulatory Council 
shall ensure that the policies established herein are incorporated 
in the FAR within 210 days from the date this Policy Letter is 
published in the Federal Register. Promulgation of final regulations 
within the 210-day period shall be considered issuance in a ``timely 
manner'' as prescribed in 41 U.S.C. 405(b).
    6. Information Contact. Questions regarding this Policy Letter 
should be directed to William Coleman, Deputy Administrator, Office 
of Federal Procurement Policy, 725 17th Street, NW, Washington, DC 
20503, telephone 202-395-3503, facsimile 202-395-5105.
    7. Judicial Review. This Policy Letter is not intended to 
provide a constitutional or statutory interpretation of any kind and 
it is not intended, and should not be construed, to create any right 
or benefit, substantive or procedural, enforceable at law by a party 
against the United States, its agencies, its officers, or any 
persons. It is intended only to provide policy guidance to agencies 
in the exercise of their discretion concerning Federal contracting. 
Thus, this Policy Letter is not intended, and should not be 
construed, to create any substantive or procedural basis on which to 
challenge any agency action or inaction on the ground that such 
action or inaction was not in accordance with this Policy Letter.
    8. Effective Date. The Policy Letter is effective 30 days after 
the date of issuance.
Steven Kelman,
Administrator.
[FR Doc. 95-2912 Filed 2-6-95; 8:45 am]
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