[Federal Register Volume 81, Number 135 (Thursday, July 14, 2016)]
[Rules and Regulations]
[Pages 45833-45851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16245]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 2, 15, 19, and 52

[FAC 2005-89; FAR Case 2014-003; Item I; Docket No. 2014-0003; Sequence 
No. 1]
RIN 9000-AM91


Federal Acquisition Regulation; Small Business Subcontracting 
Improvements

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and the National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the 
Federal Acquisition Regulation (FAR) to implement regulatory changes 
made by the Small Business Administration, which provide for a 
Governmentwide policy on small business subcontracting.

DATES: Effective: November 1, 2016.

FOR FURTHER INFORMATION CONTACT: Ms. Mahruba Uddowla, Procurement 
Analyst, at 703-605-2868 for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat Division at 202-501-4755. Please cite FAC 2005-89, FAR Case 
2014-003.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 80 FR 32909 on June 10, 2015. The proposed rule discussed 
regulatory changes made by the Small Business Administration (SBA) in 
its final rule published at 78 FR 42391, on July 16, 2013, concerning 
small business subcontracting. SBA's final rule implements the 
statutory requirements in sections 1321 and 1322 of the Small Business 
Jobs Act of 2010 (Pub. L. 111-240), as well as other changes aimed at 
improving subcontracting regulations to increase small business 
opportunities. The changes being implemented in this final rule include 
the following:
    (1) Requiring prime contractors to make good faith efforts to 
utilize their proposed small business subcontractors during performance 
of a contract to the same degree the prime contractor relied on the 
small business in preparing and submitting its bid or proposal. To the 
extent a prime contractor is unable to make a good faith effort to 
utilize its small business subcontractors as described above, the prime 
contractor is required to explain, in writing, within 30 days of 
contract completion, to the contracting officer the reasons why it is 
unable to do so.
    (2) Authorizing contracting officers to calculate subcontracting 
goals in terms of total contract dollars in addition to the required 
goals in terms of total subcontracted dollars.
    (3) Providing contracting officers with the discretion to require a 
subcontracting plan in instances where a small business rerepresents 
its size as an other than small business.
    (4) Requiring subcontracting plans even for modifications under the 
subcontracting plan threshold if said modifications would cause the 
contract to exceed the plan threshold.
    (5) Requiring prime contractors to assign North American Industry 
Classification System (NAICS) codes to subcontracts.
    (6) Restricting prime contractors from prohibiting a subcontractor 
from discussing payment or utilization matters with the contracting 
officer.
    (7) Requiring prime contractors to resubmit a corrected 
subcontracting report within 30 days of receiving the contracting 
officer's notice of report rejection.
    (8) Requiring prime contractors to provide the socioeconomic status 
of the subcontractor in the notification to unsuccessful offerors for 
subcontracts.
    (9) Requiring prime contracts with subcontracting plans on task and 
delivery order contracts to report order level subcontracting 
information after November 2017.
    (10) Funding agencies receiving small business subcontracting 
credit.
    (11) On indefinite-delivery, indefinite-quantity contracts, the 
contracting officer may establish subcontracting goals at the order 
level (but not a new subcontracting plan).
    Twenty-seven respondents submitted comments on the proposed rule.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the public comments in the 
development of the final rule. A discussion of the comments received 
and the changes made to the rule as a result of those comments are 
provided as follows:

A. Summary of Significant Changes

    This final rule makes the following significant changes from the 
proposed rule:

[[Page 45834]]

     FAR 19.703(a)(2), 52.219-8(d), 52.219-9(c)(2), and 52.219-
9 Alternate IV (c)(2)--language has been revised to neither specify an 
order of precedence nor prescribe how subcontractor representations 
should be obtained by a prime contractor.
     FAR 19.704(a)(10)(iii), 52.219-9(d)(10)(iii), and 52.219-9 
Alternate IV (d)(10)(iii)--language has been revised to require order-
level reporting on single-award, indefinite delivery, indefinite 
quantity contracts intended for use by multiple agencies in addition to 
multiple-award contracts in use by multiple agencies and to clarify 
that the order-level reporting would be required after November 2017, 
which is when Electronic Subcontracting Reporting System (eSRS) will be 
ready to accommodate the requirement.
     FAR 19.704(a)(10)(iv)(A) and (B)--language has been 
revised to remove the reasons for the rejection of an Individual 
Subcontract Report or Summary Subcontract Report, since those reasons 
are not an exhaustive list.
     FAR 19.704(a)(14), 52.219-9(d)(13), and 52.219-9 Alternate 
IV (d)(13)--language has been revised to match surrounding paragraphs 
on contractor providing ``assurances''.
     FAR 19.704(c)--language has been added to clarify that the 
requirement to have separate goals for the base and option years will 
only apply to goals based on total subcontract value.
     FAR 19.705-1 and 19.705-2--language has been added to 
clarify that contracting officers may only establish subcontracting 
goals at the order level, not subcontracting plans at the order level.
     FAR 19.705-2(b)(3)--language has been revised to encompass 
services, as well as supplies.
     FAR 52.219-9(d)(3) and (e)(7)--language has been revised 
to clarify that the contractor is to assign NAICS codes and 
corresponding size standards to all subcontracts, not list NAICS codes 
in subcontracting plans.

B. Analysis of Public Comments

 1. Support for the Rule
    Comment: Six respondents supported the overall changes and 
clarifications contemplated in the proposed rule. Among the positive 
changes noted by these respondents were the clarification of the 
subcontract reporting process, clarification of the HUBZone 
certification requirements, clarification of the requirement for 
contractors to notify unsuccessful offerors for subcontracts, and 
convenience afforded by allowing contractors to accept small business 
size and status certifications made in the System for Award Management 
(SAM). Other respondents noted that the clarification of what it means 
to ``use'' a small business concern when preparing a bid or proposal 
ensures that contractors can reasonably identify situations where the 
requirement applies and ensure proper notification is given.
    Response: The Councils acknowledge these areas of agreement.
    Comment: One respondent commented that they concurred with the 
clarification that a change in size status does not change the terms 
and conditions of a contract.
    Response: The Councils acknowledge this comment; however, it is 
important to note that the contracting officer does have discretionary 
authority to require a subcontracting plan if the contractor 
rerepresents that its size status has changed from small to other than 
small.
2. Requirement for a Subcontracting Plan
a. Subcontracting Opportunities
    Comment: Three respondents commented that the rule provides a 
contracting officer the authority to require a subcontracting plan from 
a prime contractor in two situations: when a prime contractor that was 
a small business concern at contract award recertifies as an other than 
small business concern (FAR 19.301-2(e)); and when a modification 
increases the total dollar value of a contract above the subcontracting 
plan threshold (FAR 19.702(a)(3)). The respondents explained that in 
certain situations under these circumstances, requiring the creation of 
a subcontracting plan would be administratively burdensome and provide 
few substantive subcontracting opportunities. As examples of when a 
subcontracting plan may not be appropriate, the respondents mention the 
following situations: contract performance is under way and the prime 
contractor has pre-existing exclusive supplier agreements with 
subcontractors; there are very few remaining or additional 
subcontracting opportunities; or the performance of the contract is 
almost complete. One of the respondents suggested providing the 
contracting officer additional guidance on when it is appropriate to 
require the submission of a subcontracting plan during contract 
performance. All of the respondents recommended the addition in the 
rule of the word ``significant'' before ``subcontracting 
opportunities'' at 19.702(a)(3) ``. . . if the contracting officer 
determines that subcontracting opportunities exist.''
    Response: The rule provides the contracting officer authority to 
require the submission of a subcontracting plan under the circumstance 
noted. Specifically, at FAR 19.301-2(e), ``the contracting officer may 
require a subcontracting plan . . . if a prime contractor's size status 
changes from small to other than small as a result of a size 
rerepresentation.'' At FAR 19.702, the mandatory requirement for 
submission of a subcontracting plan only happens ``if the contracting 
officer determines that subcontracting opportunities exist.'' The rule 
contains language at FAR 19.705-2(b) that provides general guidance to 
contracting officers on how to determine whether subcontracting 
possibilities exist in the circumstances noted in the comment.
    It would not be feasible in the final rule to include every 
possible factor that a contracting officer will need to consider in 
determining whether subcontracting opportunities exist, because these 
conditions will vary from acquisition to acquisition. Factors such as 
the remaining ceiling amount on the contract, effect on current prime 
contractor subcontractor agreements, amount of work ultimately going to 
the prime contractor's subcontractors that are small business concerns 
can all weigh heavily in this decision. As such, the language in the 
rule remains unchanged.
b. Treatment of Options
    Comment: One respondent recommended the words ``or an option is 
exercised'' be deleted from paragraph (e) of FAR 19.705-2. Options are 
addressed in the initial subcontracting plan and whatever 
subcontracting possibilities that exist are defined in the initial 
plan. Requiring amendment of a plan whenever an option is exercised is 
redundant and adds cost and administrative burden, with little benefit.
    Response: The Councils reviewed the area of the rule identified by 
the respondent to ensure that the appropriate requirements were being 
applied to subcontracting. The rule already reflects a revision to the 
existing FAR text to clarify that the goals shall be adjusted to 
reflect any new subcontracting opportunities that were not envisioned 
at the time of contract award, not as a requirement to negotiate a new 
goal each time an option is exercised. The final rule adds language at 
FAR 19.705-2(e) that the opportunities were not envisioned at the time 
of contract award.

[[Page 45835]]

c. Clarify When a Subcontracting Plan is not Required
    Comment: One respondent recommended clarification to FAR 
19.702(b)(4) while this rule is being finalized. The respondent 
commented that FAR 19.702(b)(4) is poorly worded and that a literal 
interpretation would be that, in order for the exception to apply, the 
contract modification would have to be within the general scope of the 
contract AND the contract modification would have to not include FAR 
clause 52.219-8. The respondent understands that this is not the intent 
and recommended restructuring the sentence to read ``For contract 
modifications if (1) the contract modification is within the scope of 
the contract, and (2) the contract being modified does not contain the 
clause at 52.219-8, Utilization of Small Business Concerns.''
    The respondent also mentioned that by moving the language currently 
at FAR 19.705-2(c) to FAR 19.705-2(c)(2), it now gives the impression 
that the approval requirement for not including a subcontracting plan 
only applies when a modification increases the total contract dollars 
above the subcontracting plan threshold.
    Response: The Councils reviewed the areas of the rule identified by 
the respondent and have amended the FAR in the final rule at FAR 
19.702(b)(4), 19.705-2(c), and 19.705-2(f).
d. When a Small Business Rerepresents as Other Than Small
    Comment: One respondent recommends that when a prime contractor's 
size changes from small to other than small as a result of 
rerepresentation, the contracting officer should be required to request 
a subcontracting plan.
    The respondent further stated that Government contractors are 
consolidating and contract opportunities for small firms are decreasing 
as large businesses are acquiring small businesses, and as such when 
small businesses become other than small, a subcontracting plan should 
be required (particularly for indefinite-delivery, indefinite-quantity 
contracts with more than two years remaining).
    Response: SBA's final rule grants contracting officers the 
discretion to require a subcontracting plan if size changes as a result 
of size rerepresentation.
 3. Goals in Terms of Total Contract Dollars
    Comment: A number of respondents expressed concern that the new 
requirement at FAR 19.704(a)(2) allowing contracting officers to 
require the contractor to establish subcontracting goals both in terms 
of the total dollars planned to be subcontracted and now also in terms 
of the total contract dollars will lead to confusion. Three respondents 
were strongly opposed to this approach, since the goals based on total 
contract value would be lower than the goals based on total planned 
subcontracting dollars, allowing a contracting officer to unfairly 
penalize a contractor that chose to perform the work using its own 
internal resources. One respondent remarked that the requirement for 
contractors to establish small business goals based on total contract 
dollars would be subject to protest and was contrary to the SBA's 
regulations. Two other respondents stated that the requirement for 
contractors to establish goals based on total subcontract dollars and 
total contract dollars should be mandatory.
    Response: The Councils realize that this new requirement may entail 
additional effort on the behalf of contractors and the Government; 
however, many contracting officers have already established 
subcontracting goals in terms of total contract dollars as a means of 
obtaining additional insight into the contractor's subcontracting 
performance, and it has proven to be an effective management tool. As 
set forth in the proposed rule, the use of this approach is 
discretionary, not mandatory, and it is not intended to dissuade 
contractors from making normal make or buy decisions, or other prudent 
business choices.
    Establishing two sets of subcontracting goals may not work in all 
situations, nor would it be beneficial for either the Government or the 
contractor to establish unrealistic goals. This is why contracting 
officers will need to carefully consider using this approach on a case-
by-case basis, factoring in the unique characteristics of the 
acquisition at hand and the results of market research. In addition, 
although the Councils cannot predict the outcome of any solicitation in 
terms of the likelihood that it will be protested, this rule is fully 
consistent with SBA's regulations at 13 CFR 125.3(a)(2). Finally, to 
change the decision to require goals based on total contract dollars 
from discretionary to mandatory is beyond the scope of this rule.
    Comment: One respondent wanted to know if the definition for total 
contract dollars at FAR 19.701 and clause 52.219-9(b) included the 
maximum quantity (or ceiling price) of an indefinite quantity contract, 
and asked that this be clarified in the rule. This respondent remarked 
that the definition for total contract dollars. . .

    ``total contract dollars means the final anticipated dollar 
value, including the dollar value of all options 19.701''

. . . was inconsistent with the requirement to have separate goals for 
the base and option years. Further, basing a goal on the total contract 
value would likely place the contractor at a great disadvantage should 
the contract options not be exercised.
    Response: The definition for total contract dollars includes the 
maximum or ceiling price for an indefinite delivery contract. The 
requirement to have overall goals encompassing the entire contract, 
including options, is consistent with SBA's regulations, and as noted, 
this rule amends the FAR to reflect SBA's regulations. However, the 
Councils have revised the rule at FAR 19.704(c) to clarify that the 
requirement to have separate goals for the base and option years will 
only apply to goals based on total subcontract value.
4. Assigning NAICS Codes to Subcontracts
    Comment: Several respondents commented on the requirement in the 
proposed rule that prime contractors must identify in the 
subcontracting plan the NAICS code and corresponding size standard of 
each subcontract with a small business concern. A number of these 
respondents commented that due to the fact that contractors identify 
potential subcontracts after the award of the prime contract 
(particularly in the case of indefinite delivery, indefinite quantity 
contracts), it is possible that the NAICS codes and size standards 
projected in the subcontracting plan would be inaccurate and impossible 
to estimate. Other respondents commented that identifying the NAICS 
codes for all procurements would be administratively burdensome, and 
may result in excessively lengthy subcontracting plans. It was also 
noted that this burden has the potential to harm small business 
participation rather than enhance it. Numerous alternative approaches 
to the proposed rule were suggested.
    Response: The Councils have revised the rule at FAR clause 52.219-9 
to reflect the requirement from SBA's final rule, which directs the 
contractor to assign NAICS codes and corresponding size standards to 
all subcontracts, not to list NAICS codes in subcontracting plans.
    Comment: One respondent recommended that at FAR clause 
52.219(c)(2)(i)(B), the small business represent that the NAICS code is

[[Page 45836]]

current, accurate, and complete as of the date of the offer for the 
subcontract, in addition to its size and status representation.
    Response: The Councils did not adopt this suggestion in the final 
rule, since it is the responsibility of the contractor to accurately 
assign the proper NAICS code to the subcontract.
5. Subcontractor Representations
a. General
    Comment: One respondent inquired where to find guidance regarding 
accepted practices for small business self-certification, auditing of 
small business certifications, and agency enforcement responsibilities.
    Response: Subpart 19.3 of the FAR provides guidance for required 
small business representations in connection with Federal prime 
contracts. In addition, SBA's regulations at 13 CFR parts 121, 124, 
125, 125, and 127 provide detailed information covering the small 
business certification procedures, audits, and enforcement.
    Comment: One respondent commented that contractors should be 
allowed to accept the written representation from potential 
subcontractors, regardless of whether or not the offeror was registered 
in SAM.
    Response: The FAR rule allows the prime contractor, under specific 
conditions, to accept size and socioeconomic status representations 
either from SAM or by written representation. However, the final rule 
has been revised to clarify there is no order of precedence for either 
method of acceptance, and to clarify that prime contractors are 
prohibited from requiring the use of SAM for the purposes of 
representing size or socioeconomic status.
    Comment: A few respondents commented that the requirement to have a 
current representation each time an offer is made on a subcontract, 
including purchase orders between a prime contractor and a vendor, 
would be burdensome. Two respondents recommended that the rule be 
revised to make it acceptable for a contractor to obtain small business 
size representations on an annual basis, since small businesses are 
required to annually update their small business status, and the 
subcontractor should be obliged to promptly update any information in 
the event of a change.
    Response: The requirement for a concern to represent its 
eligibility status when submitting an offer is not new; the proposed 
rule merely added guidance by giving prime contractors the option to 
accept either a subcontractor's self-certification in SAM or a written 
representation. With regard to obtaining the small business 
representation on an annual basis, the respondent's recommendation is 
not in keeping with SBA's regulations and, therefore, was not adopted 
by the Councils. SBA's regulations at 13 CFR 121.411(b) require that a 
subcontractor must qualify and self-certify as a small business at the 
time it submits its offer as a small business subcontractor.
    Comment: Two respondents generally remarked and implied, 
respectively, that the requirement to make a size and socioeconomic 
representation on every offer was burdensome.
    Response: The respondents' comments are noted; however, the 
representation requirement is in keeping with SBA's regulations. SBA's 
regulations at 13 CFR 121.411(b) require that a subcontractor must 
qualify and self-certify as a small business at the time it submits its 
offer as a small business subcontractor.
b. Written Representation Versus SAM Representation
    Comment: A few respondents questioned whether the proposed rule 
should go so far as to only accept a subcontractor's written 
representation of its size and socioeconomic status if the contractor 
ascertained that the small business was not registered in SAM. They 
pointed out that this requirement was inconsistent with the SBA's 
regulations and placed unnecessary burdens on the contractor.
    Response: There is no order of precedence in choosing whether to 
accept the small business subcontractor's representation through SAM or 
by a direct written response; both methodologies are equally 
acceptable. The rule has been revised to clarify that the contractor 
may accept either the subcontractor's written representation or its 
self-certification in SAM with equal assurance.
    Comment: One respondent remarked that SBA's final rule referred to 
relying on subcontractor representations in SAM for the purpose of 
``maintaining a small business source list,'' and concluded this would 
foreclose reliance on SAM for uses other than maintaining a source 
list. For this reason, the respondent recommended deleting the proposed 
revision at FAR clause 52.219-8(d)(2) to allow contractors the 
flexibility to rely on SAM if they so choose.
    Response: The SBA rule establishes that SAM may be used for both 
purposes. However, the final rule is revised to clarify that a 
contractor has the flexibility to rely on SAM if they so choose.
c. Maintaining ``Safe Harbor''
    Comment: Two respondents questioned whether the ``safe harbor'' 
afforded to a prime contractor for accepting a firm's written 
representation of its size or socioeconomic status in connection with a 
subcontract, extended to electronic representations. One respondent 
suggested that FAR 4.502(d) be amended to allow contractors to accept 
electronically signed representations.
    Response: The Councils did not adopt the change suggested by the 
respondent, but have amended the FAR in the final rule at FAR 
19.703(a)(2), 52.219-8(d), 52.219-9(c)(2), and Alternate IV of 52.219-9 
at paragraph (c)(2), to clarify that a prime contractor acting ``in 
good faith'' is not held liable for misrepresentations made by the 
subcontractor regarding its size or socioeconomic status. SBA 
regulations at 13 CFR 121.411(b), provide that prime contractors may 
accept a subcontractor's electronic self-certification as to its size, 
if the subcontract contains a clause that provides that the 
subcontractor verifies by its submission of the offer that the size or 
socioeconomic representations and certifications made in the SAM (or 
any successor representations system) are current, accurate, and 
complete as of the date of the offer for the subcontract. SBA's 
regulations at 13 CFR 121.411(h), 124.1015(d), 125.29(d), 126.900(d), 
and 127.700(d) afford the ``safe harbor'' protection to the prime 
contractor for the subcontractor's misrepresentation of its size or 
socioeconomic status representation or certification. SBA's regulations 
serve as the regulatory basis for this FAR rule.
6. Orders
a. Goals
    Comment: A number of respondents commented on the rule explicitly 
authorizing contracting officers to establish small business 
subcontracting goals for orders. One respondent submitted a number of 
questions seeking clarification on this authority, which indicated that 
the respondents believed the authority was tantamount to requiring a 
subcontracting plan for an order. The other respondent assumed that the 
authority to establish goals for orders was separate from a requirement 
for a subcontracting plan for orders and suggested language for the 
rule that would make this clear. This respondent also commented that 
unless the goals established on orders were higher than

[[Page 45837]]

the goals established on the parent contract, the prime contractor may 
not meet its goals under the parent contract.
    Response: The final rule has been revised at FAR 19.705-1 and 
19.705-2 to clarify that contracting officers may only establish 
subcontracting goals at the order level, not subcontracting plans. The 
authority remains discretionary for ordering contracting officers, 
i.e., the contracting officer may choose to establish goals for any 
order or not. The rule also maintains the discretion of the contracting 
officer to establish whatever goal they deem appropriate for an order.
b. Reporting Requirements
    Comment: Two respondents submitted comments and questions relating 
to the requirement that prime contractors provide subcontracting data 
for each order when reporting subcontracting achievements for multiple-
award contracts intended for use by multiple agencies.
    One respondent commented that due to the volume of orders, a 
contractor may not be able to comply with this requirement and that the 
benefits of this requirement are minimal, but may result in driving up 
contract cost. The respondent suggested that the order-level reporting 
be an optional requirement, as opposed to a mandatory one, and also 
recommended that the requirement only apply when goals are established 
on orders.
    Response: This rule is implementing regulatory changes made by SBA, 
which include the mandatory order-level reporting requirement. In 
addition to compliance with SBA's regulations, the order-level 
reporting requirement has the benefit of facilitating the allocation of 
subcontracting credit to funding agencies; proper allocation of credit 
ensures that funding agencies are incentivized to promote small 
business subcontracting on orders. The Councils are working with the 
Integrated Award Environment (IAE) to ensure that eSRS facilitates 
order-level reporting in a way that minimizes the additional burden to 
contractors.
    Comment: Both respondents asked whether this reporting requirement 
would apply to existing multiple-award contracts or only to those 
contracts awarded after the rule becomes final.
    Response: The order-level reporting requirement will apply via the 
updated FAR clause 52.219-9, Small Business Subcontracting Plan. Unless 
otherwise specified, FAR changes are applied to solicitations and 
contracts in accordance with FAR 1.108(d).
    Comment: One of the respondents asked whether this reporting 
requirement would apply to all orders or only orders of a certain 
dollar value and whether this requirement is optional for single-award, 
indefinite delivery, indefinite quantity contracts.
    Response: As the rule states at FAR 19.704(a)(10)(iii) and 52.219-
9(d)(10)(iii), subcontracting data is required for each order, 
regardless of dollar value. The rule has been revised to now also 
require order-level reporting on single-award indefinite delivery, 
indefinite quantity contracts intended for use by multiple agencies in 
order to ensure that subcontracting credit is allocated based on 
funding agencies for all contracts, not just multiple-award contracts 
in use by multiple agencies.
 7. Failure To Make a Good Faith Effort
    Comment: One respondent pointed out that depending on how ``good 
faith effort'' is defined, the rule could be tantamount to requiring a 
``guaranteed work share.''
    Response: The FAR does not provide a definition for the phrase 
``good faith effort.'' However, ``failure to make a good faith effort 
to comply with the subcontracting plan'' is defined in paragraph (a) of 
the clause at FAR 52.219-16, Liquidated Damages--Subcontracting Plan, 
which is further explained at FAR 19.705-7(d); the SBA gives further 
guidance at 13 CFR 125.3. Also, neither SBA's regulations nor the FAR 
rule establish a requirement for a ``guaranteed work share.''
    Comment: One respondent objected to characterizing the failure to 
comply in good faith with the subcontracting plan as a material breach 
of contract, since material breaches are typically tied to key 
objectives or contract targets. Therefore, using the ``good faith'' 
standard would be an inappropriate and punitive basis for something as 
drastic as contract termination.
    Response: Fulfillment of the small business subcontracting plan is 
not merely ancillary to the objective of a contract. Failure of a 
contractor to comply in good faith with its subcontracting plan is a 
failure to perform an obligation on which the award of the contract was 
predicated.
    The principle that a failure to comply in good faith with the 
subcontracting plan is a material breach of contract predates this FAR 
rule. The typical remedy provided in the FAR when the contracting 
officer decides that the contractor failed to comply in good faith with 
its subcontracting plan is the assessment of liquidated damages in 
accordance with FAR clause 52.219-16. However, neither this remedy nor 
any other remedy the contracting officer decides is appropriate can be 
characterized as punitive. Rather, liquidated damages are imposed so as 
to compensate the Government for the contractor's failure to fulfill a 
material obligation of the contract.
    Comment: Three respondents agreed that failure to fulfill 
subcontracting goals is a material breach of contract. However, one 
respondent was unclear as to the process the contractor needs to follow 
should the contracting officer advise that the contractor has failed to 
make a good faith effort. One other respondent stated that stricter 
penalties for negative behavior should be employed.
    Response: The procedures the contractor will follow should it 
receive written notification from the contracting officer of its 
failure to make a good faith effort are provided at FAR clause 52.219-
16. In terms of amending the FAR to provide for stricter penalties, the 
Councils do not have statutory authority to do so.
 8. Flow Down of Subcontracting Plan Requirements to Subcontractors
    A few respondents submitted comments related to paragraph (j) of 
FAR clause 52.219-9, which provides guidance on the flow down of the 
clause to subcontractors.
    Comment: One respondent suggested clarification to FAR clause 
52.219-9(j) to emphasize that subcontracting plans are not required 
from subcontractors when the prime contract contains the clause at FAR 
52.212-5, Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders-Commercial Items. The respondent suggests the 
clarification because of their experience with agencies' interpreting 
the FAR as requiring prime contractors with commercial plans to flow 
down the subcontracting plan requirement if the subcontractor is not 
providing a commercial item.
    Response: The changes suggested to paragraph (j) of FAR clause 
52.219-9 are not in keeping with the statutory requirements or SBA's 
implementing regulations.
    Comment: The other respondents suggested clarification of the 
proposed text at FAR 52.219-9(l) in order to avoid misinterpretation of 
the new language, which would put it in direct conflict with paragraph 
(j) of FAR clause 52.219-9. Specifically, the respondents stated that 
the revised language ``subcontract awards by affiliates shall be 
treated as subcontract awards by the Contractor'' will be interpreted 
as requiring subcontracting plans from subcontractors providing 
commercial items through flow down of FAR clause 52.219-9.

[[Page 45838]]

    Response: There is no reason to interpret the proposed language as 
requiring flow down of the clause to subcontractors. Paragraph (l) of 
FAR clause 52.219-9 addresses the reporting requirements and what a 
contractor may or may not take credit for when reporting its 
subcontracting achievements. The existing language in paragraph (l) 
states that a contractor cannot take credit for (i.e., report as 
subcontracting) purchases from an affiliate. The new language, in 
keeping with SBA's final rule, clarifies that subcontract awards made 
by affiliates shall be treated as subcontract awards made by the 
contractor. Therefore, the contractor must take credit for first-tier 
subcontracts entered into by an affiliate.
 9. Notification to Unsuccessful Offerors for Subcontracts
    Comment: Three respondents commented on the proposed rule 
clarifying that prime contractors notify unsuccessful offerors for 
subcontracts in writing.
    One respondent indicated that the requirement should also include a 
detailed explanation from the prime why the subcontractor was 
unsuccessful, as well as the granting of a cure period. Another 
remarked that due to the high volume of procurements, it is not always 
possible or realistic to notify unsuccessful offerors in writing, 
regardless of size. The onus should be on the supplier to follow up on 
the status of award and whether the subcontractor has been selected. 
The third respondent recommends that primes must offer these 
unsuccessful subcontractors an in-person or oral debriefing 
(subcontractor's choice) and offer at least five business days from the 
notification date to request that debriefing.
    Response: The requirement for prime contractors to notify 
unsuccessful small business offerors parallels SBA's regulations at 13 
CFR 125.3(c)(1)(viii), which contemplate a pre-award written 
notification as to the name and location of the apparent successful 
offeror and whether the successful offeror is a small business and if 
so, its socioeconomic categories. The Councils note that FAR clause 
52.219-9 already included the requirement for notification; this rule 
is only adding the requirement that the notification include the 
socioeconomic status of the successful subcontract offeror and 
clarifying that the notification occur before award of the subcontract. 
It is not within the scope of this FAR Case to levy an additional 
period on prime contractors.
10. Contractors' Written Explanation for Not Using Small Business 
Subcontractors
    A number of respondents commented on the rule requiring a prime 
contractor's written explanation as to why it did not utilize small 
business concerns to the same extent that the small business was used 
in preparing the bid or proposal.
    Comment: One respondent recommended the explanation or report 
should be available to the subcontractor for review after submission 
and the small business be afforded the opportunity to add any relevant 
facts.
    Response: SBA's regulations at 13 CFR 125.3(c)(4) only provide that 
the written explanation be provided to the contracting officer prior to 
the submission of the invoice for final payment and contract close-out. 
The SBA final rule did not contemplate an adjudicative process for 
small businesses to provide additional input. Therefore, it is not 
within the scope of this FAR Case to address this issue.
    Comment: One respondent commented that section 1322 of the Small 
Business Jobs Act, implemented in proposed FAR 19.704(a)(12) and (13), 
will decrease opportunity for small business because it will drive 
prime contractors away from identifying potential small businesses in 
their subcontracting plans. Primes are encouraged to list no small 
businesses or large businesses to avoid punishment should a potential 
small business not be utilized based on unforeseen circumstances 
between proposal and subcontract award.
    Response: The intent of incorporating SBA's revised regulations at 
13 CFR 125.3(c)(4) into the FAR is to increase the likelihood that the 
contractor will carefully consider its small business supplier base 
when developing the small business subcontracting plan, and in doing so 
will more likely be capable of adhering to the assurances it made in 
the plan. FAR 19.702 already requires that any contractor receiving a 
contract for more than the simplified acquisition threshold must agree 
in the contract that small business concerns will have the maximum 
practicable opportunity to participate in contract performance.
    Comment: One respondent commented that FAR 19.704(a)(13) is left to 
the offending contractor and is considered timely if ``submitted to the 
contracting officer within 30 days of contract completion.'' Such 
timing makes the anticipated statutory relief illusory. The respondent 
suggests amending FAR 19.704(a)(13) (and corresponding modifications to 
FAR clause 52.219-9) to require the contractor to provide the written 
notice within 5 days of making a decision not to utilize a 
subcontractor or supplier described in FAR 19.704(a)(12), as well as 
written explanation supporting the alternative decision.
    Response: The FAR rule is predicated on SBA's regulation at 13 CFR 
125.3(c)(4), which provides that the written explanation must be 
submitted to the contracting officer prior to the submission of the 
invoice for final payment and contract close-out. However, the FAR rule 
provides a shorter timeframe (i.e., within 30 days of contract 
completion) than SBA's regulations provide in order to comply with a 
related requirement in SBA's regulations (see 13 CFR 125.3(d)(4)) that 
contracting officers use the written explanation in the performance 
assessment for the prime contractor. The SBA final rule did not 
contemplate an additional notice period and, therefore, it is not 
within the scope of this FAR rule.
    Comment: One respondent recommended that prime contractors that do 
not utilize small business in their subcontracting plans have points 
deducted when other offerors include small businesses in their 
subcontracting plans.
    Response: SBA's regulations at 13 CFR 125.3 do not contemplate such 
a requirement. However, there is nothing in the FAR that precludes the 
contracting officer from including evaluation criteria in the 
solicitation that will allow the contracting officer to evaluate the 
extent to which offerors identify and commit to small business 
participation in the contract.
11. Privity
    Comment: One respondent stated that permitting a subcontractor to 
discuss payment or utilization matters with the contracting officer 
will allow the subcontractor to establish its own relationship with the 
contracting officer. Another respondent recommended that the FAR be 
amended to require that contracting officers monitor contractors' 
compliance in terms of not prohibiting subcontractors from discussing 
matters of payment or non-utilization with the contracting officer. A 
third recommended that where a subcontractor has furnished an 
allegation of lack of good faith effort to the contracting officer, the 
contracting officer must share the submission with the contractor to 
make them aware of the allegation.
    Response: The recommendations made by these respondents are not in 
keeping with the principles of privity.

[[Page 45839]]

Although limited communication between the contracting officer and the 
subcontractor may occur in accordance with this clause, it is not the 
role of the contracting officer to take any action on behalf of the 
subcontractor; rather, any action the contracting officer may take will 
be with respect to the contractor. As SBA noted in its final rule, the 
contracting officer cannot be a party to disputes between the 
contractor and its subcontractor, although he or she will be involved 
in evaluating the contractor's subcontracting performance. FAR Case 
2014-004, Payment of Subcontractors, provides more specific guidance 
related to payments to subcontractors.
12. Use of the Term ``Contractor'' Versus ``Prime Contractor''
    Comment: Two respondents found that the use of the terms 
``Contractor'' and ``prime Contractor'' in FAR clause 52.219-9 was 
somewhat confusing, since it was not clear when a requirement applied 
to the prime contractor alone, or to the prime and a subcontractor at a 
first or lower tier. These respondents recommended that the term 
``prime Contractor'' be used for those requirements that apply only to 
prime contractors.
    Response: This recommendation was not adopted by the Councils. The 
clause is intended to reflect the relationship between the prime 
contractor and the Federal agency that executed the contract; 
therefore, the terms ``Contractor'' and ``prime Contractor'' as used in 
the clause, are synonymous and mean the ``prime contractor.'' Within 
the context of the prime contract, requirements that must be fulfilled 
by subcontractors will be indicated by use of the term 
``subcontractor.''
 13. Prime Contractor--Subcontractor Relationship
    Comment: One respondent commented that the liability of a prime 
contractor to the small business subcontractor for not complying with 
its subcontracting plan should be unlimited, to include the loss of 
revenue, loss of profits, and loss of goodwill, which will likely be 
irreparable, and also indicated the rule would have implications to 
exclusivity provisions in teaming arrangements and/or subcontracts.
    Response: Neither SBA's final rule nor the FAR prescribe elements 
to be considered in determining the liability of a prime contractor to 
its subcontractor when the prime contractor has not acted in ``good 
faith.'' Further, the FAR does not prescribe ``exclusivity provisions'' 
in either teaming agreements or subcontracts; therefore, the rule 
cannot address implications to these relationships.
 14. Funding Agencies Receiving Subcontracting Credit
    Comment: One respondent stated their support of the initiative to 
allocate subcontracting credit based on funding agency and explained 
that this change, being applied to all contracts, will provide 
consistent methodology and reliable data, and will prohibit funding 
agencies from picking and choosing types of contracts based on whether 
or not they could get subcontracting credit.
    Response: The Councils acknowledge receipt of the comment.
    Comment: One respondent commented that they are uncertain of the 
impact of the rule in changing the way subcontracting credit is 
allocated across Government, i.e., from contracting agency to funding 
agency, considering the rule ties the new order-level reporting 
requirement to only those multiple-award contracts with individual 
subcontracting plans, that require Individual Subcontract Reports 
(ISRs). The respondent stated that many Governmentwide acquisition 
contracts (GWACs) and Federal Supply Schedule (FSS) contracts have 
commercial plans for which there are only Summary Subcontract Reports 
(SSRs), not ISRs, and the SSRs are how agencies are allocated 
subcontracting credit.
    Response: In addition to the requirement for order-level reporting 
on contracts like GWACs and FSS with individual subcontracting plans 
(i.e., contracts that require ISRs), the proposed rule contained minute 
changes to the requirement for SSRs, which would facilitate funding 
agencies getting credit for all other contracts.
 15. Systems-Related Concerns
    Two respondents submitted comments and questions related to 
implementation of the rule's requirements in Governmentwide systems 
such as Federal Procurement Data System (FPDS) and eSRS.
    Comment: Two respondents pointed out that FPDS and eSRS would need 
to be modified to allow for order-level reporting of subcontracting 
achievements. One respondent also pointed out that FPDS and eSRS would 
need to be modified to allow for funding agencies to receive 
subcontracting credit for all contracts.
    Response: The Councils are aware that eSRS does not currently allow 
for order-level reporting and are working with IAE to ensure this 
capability is implemented in eSRS. The rule has been revised to clarify 
that the order-level reporting requirement applies after November 30, 
2017, which is when eSRS is expected to accommodate the requirement. 
The Councils are also working with IAE to facilitate reporting of SSRs 
based on funding agency so as to ensure the appropriate agency gets 
subcontracting credit but contractors can continue to report SSRs as 
they do now and still be compliant with the revised FAR clause 52.219-
9.
    Comment: One respondent asked whether eSRS would be modified to 
capture NAICS codes on Individual Subcontracting Reports (ISRs).
    Response: No changes will be made to eSRS to capture NAICS codes on 
reports. The rule has been revised to remove the requirement for 
contractors to list NAICS codes in the subcontracting plan.
    Comment: One respondent asked whether FPDS and eSRS would be 
modified to accommodate the scenarios where a contracting officer 
established subcontracting goals in terms of total contract dollars.
    Response: There will be no need for changes to FPDS or eSRS to 
accommodate those contracts with individual subcontracting plans where 
a contracting officer established subcontracting goals in terms of 
total contract dollars. eSRS already provides for an ability to report 
subcontracting achievements in terms of total contract dollars in ISRs, 
by using the ``Base and All Options Value'' field from FPDS as a basis 
for the calculations. The rule provides for a definition of ``total 
contract dollars'' so when contracting officers complete the ``Base and 
All Options Value'' field in FPDS accordingly, the business rules are 
already in place in FPDS and eSRS to accommodate those subcontracting 
plans for which goals in terms of total contract dollars have been 
established.
16. Lack of Burden Analysis
    Comment: One respondent recommended that the FAR rule clearly 
exempt commercial or commercially available off-the-shelf (COTS) item 
suppliers from the revisions at FAR clause 52.219-9, since the Small 
Business Jobs Act of 2010 made no mention of applying the changes set 
forth in the rule to commercial items or COTS items. The alternative 
suggestion from this respondent was for the FAR Council to address the 
omission of the burden analysis and/or produce some evidence to support 
the claim that applying the proposed rule to commercial/COTS suppliers 
is in the best interests of the Federal Government.

[[Page 45840]]

    Response: The Councils did not adopt this respondent's 
recommendation, because neither the law nor SBA's regulations provide 
an exemption for the application of the requirements in this rule to 
acquisitions for commercial or COTS items (although in the case of a 
contract for commercial or COTS items, the contractor is not required 
to flow down the subcontracting FAR clause at 52.219-9 to 
subcontractors). The use of a commercial subcontracting plan is 
preferred for contractors furnishing commercial items, since many of 
the requirements associated with small business subcontracting plans 
are either streamlined or are not applicable to commercial plans. 
Nevertheless, a contractor that has been awarded a contract that meets 
the statutory requirements for a subcontracting plan must comply with 
the requirements discussed in this rule. Historically, FAR clause 
52.219-9 has been applied to acquisitions for commercial and COTS 
items, as demonstrated by FAR clause 52.212-5(b).
    An analysis of the public burden associated with the implementation 
of this rule, pursuant to the Paperwork Reduction Act, as amended (44 
U.S.C. chapter 35) and an analysis of the impact of the rule on small 
entities in accordance with the Regulatory Flexibility Act was provided 
in sections V and VI of the preamble to the proposed rule. Pursuant to 
41 U.S.C. 1906, the requirements of this rule will apply to the 
acquisitions of commercial items because the FAR Council made a written 
determination that it would not be in the best interest of the Federal 
Government to exempt acquisitions of commercial items. Pursuant to 41 
U.S.C. 1907, the requirements of this rule will apply to the 
acquisitions of COTS items because the Administrator of Federal 
Procurement Policy made a written determination that it would not be in 
the best interest of the Federal Government to exempt contracts for the 
procurement of COTS items. A summary of the determinations, the final 
Paperwork Reduction Act and Regulatory Flexibility Act analyses will be 
provided in sections III, V, and VI of the preamble to the final rule.
 17. Out of Scope
a. Credit for Subcontracts Awarded to AbilityOne
    Comment: One respondent inquired as to whether eSRS would be 
modified to allow contractors to receive credit for making subcontract 
awards to AbilityOne. The respondent also inquired if this would become 
more important than meeting the small business subcontracting goals.
    Response: This inquiry relates to matters that are beyond the scope 
of the rule. Prime contractors may only take credit for subcontract 
awards made to AbilityOne participating non-profit agencies when the 
awarding agency has specific statutory authority to do so. Otherwise, 
subcontracting credit can only be taken for subcontracts made to small 
business concerns, which by definition are for-profit entities.
    b. Matters Related to the HUBZone Program
    Comment: One respondent requested several changes to SBA's HUBZone 
program eligibility requirements.
    Response: In the FAR rule, only the definitions for ``HUBZone 
contract'' and ``HUBZone small business concern'' were amended, so as 
to clarify that the representation of HUBZone status cannot be done 
through ``self-certification.'' Changes to the eligibility requirements 
for HUBZone small business concerns can only be made by SBA, which has 
the statutory authority to administer the HUBZone program. Accordingly, 
the respondent's recommended changes are beyond the scope of the FAR 
rule.
c. Inclusion of Insurance Costs in the Subcontracting Base
    Comment: Many respondents expressed concern regarding the 
requirement that prime contractors must exclude insurance costs from 
the subcontracting base, and claimed that this would be a disincentive 
for prime contractors to award subcontracts to small businesses in this 
industry sector. These respondents requested that insurance costs be 
included in the subcontracting base.
    Response: The SBA regulation at 13 CFR 125.3(a)(1)(iii) lists items 
that should not be included in the subcontracting base. One item is 
employee insurance. The FAR does not address the subject. Questions 
concerning whether or not certain insurance expenses should be excluded 
from the subcontracting base are beyond the scope of this rule and must 
be directed to SBA.
d. Unilateral Termination of a Subcontract
    Comment: One respondent stated that there should be a separate 
proposed rule prescribing that a prime contractor cannot prevent a 
subcontractor from unilaterally terminating a subcontract or teaming 
agreement in the event the subcontractor does not receive its adequate 
work share.
    Response: This comment is beyond the scope of this rule, since it 
addresses the specific relationship between the prime and its 
subcontractor.
    e. Small Business Participation Plan
    Comment: One respondent commented on the scenario where a 
subcontracting plan would be required once a small business contractor 
rerepresents as other than small business. This respondent expressed 
concern that in such a scenario, the contractor would no longer be able 
to comply with the small business utilization commitments made in its 
``Small Business Participation Plan,'' which in turn would reflect 
negatively on its contact performance.
    Response: The proposed rule does not address ``Small Business 
Participation Plans;'' rather, the rule addresses the discretionary 
authority of the contracting officer to require a subcontracting plan 
should the small business represent a change of size status from small 
to other than small. Furthermore, although some contracting officers 
have requested prime contractors to provide a ``Small Business 
Participation Plan,'' it is not a policy prescribed in the FAR and 
therefore addressing the administrative procedures associated with this 
technique is beyond the scope of the rule.
f. Definitions
    Comment: One respondent provided revisions to the definition of 
``small business subcontractor'' in FAR 2.101 and to the definition of 
``master subcontracting plan'' in FAR 19.701 and recommended they be 
incorporated into the FAR rule.
    Response: The revisions proposed to the definitions are beyond the 
scope of this rule, as they are not based on changes or clarifications 
that SBA has made in their final rule.
18. Miscellaneous Edits and Clarifications
    Comment: Two respondents pointed out typos in the proposed rule, 
specifically at FAR clause 52.219-9(d)(1) and 52.219-9(d)(6).
    Response: The rule has been revised at FAR clauses 52.219-9(d)(1) 
and 52.219-9(d)(6) to correct the typos.
    Comment: One respondent suggested edits to the language regarding 
master subcontracting plans in paragraphs (b) and (f)(1) of FAR clause 
52.219-9. The respondent's suggestion was to specify that master 
subcontracting plans are to be ``approved by the Administrative 
Contracting Office.''
    Response: The Councils did not adopt the suggested edits. The 
statutory

[[Page 45841]]

requirements and SBA's revised regulations being implemented in this 
rule do not require that a master subcontracting plan be approved by 
the ``Administrative Contracting Office.''

C. Other Changes

    This final rule contains the following additional changes:
     A reference to 19.705-2(b)(3) has been added to 19.301-
2(e) as a reminder of factors to consider when deciding whether to 
require a subcontracting plan under 19.301-2(e).
     The term ``socioeconomic'' has been added throughout the 
rule to differentiate between size status and socioeconomic status.
     Updates the text at 19.702(a)(3) and throughout the rule 
to reflect the October 1, 2015, inflationary adjustment to the 
subcontracting plan threshold.
     A technical edit at FAR 19.703(d)(2) to clarify that 
protests challenging the socioeconomic status of a HUBZone small 
business must be filed in accordance with 13 CFR 126.801.
     The introductory text of paragraph 19.704(a) has been 
revised to remove ``required'' so as to not imply that 19.301-2(e)(2) 
requires a subcontracting plan.
     The phrase ``or any successor system'' is removed from the 
rule since the FAR would be amended to reflect any successor to a 
system currently named in the FAR.
     Conforming changes are made to the cross-references at 
19.704(c) and 52.219-9(l)(1)(ii)(B).
     Conforming changes are made to additional FAR clauses that 
reference FAR clause 52.219-8, i.e., 52.212-5 basic and Alternate II, 
52.213-4, and 52.244-6.
     Restores paragraph (E) of clause 52.219-9(l)(2)(i), which 
was mistakenly left out in the published proposed rule.
     Language has been added to 52.219-9 Alternate IV (c)(1) to 
make the same clarifications made in 19.705-2(e) regarding whether the 
goals in a subcontracting plan added post-award apply retroactively.
     Minor grammatical edits throughout the rule.
    The final rule will not be making a change to the FAR 19.703(b) 
reference at FAR 19.305(c) as this is the appropriate reference for 
subcontractor size protests.

III. Applicability to Commercial Items, Including Commercially 
Available Off-the-Shelf Items

    The Federal Acquisition Regulatory (FAR) Council has made the 
following determinations with respect to the rule's application of 
Section 1321 and 1322 of the Small Business Jobs Act of 2010, to 
contracts for the acquisition of commercial items and contracts for the 
acquisition of commercially available off-the-shelf (COTS) items.

A. Applicability to Contracts for the Acquisition of Commercial Items

    Pursuant to 41 U.S.C. 1906, acquisitions of commercial items (other 
than acquisitions of COTS items, which are addressed in 41 U.S.C. 1907) 
are exempt from a provision of law unless the law (i) contains criminal 
or civil penalties; (ii) specifically refers to 41 U.S.C. 1906 and 
states that the law applies to acquisitions of commercial items; or 
(iii) the FAR Council makes a written determination and finding that it 
would not be in the best interest of the Federal Government to exempt 
contracts for the procurement of commercial items from the provision of 
law. If none of these conditions are met, the FAR is required to 
include the statutory requirement(s) on a list of provisions of law 
that are inapplicable to acquisitions of commercial items.
    The purpose of this rule is to implement sections 1321 and 1322 of 
the Small Business Jobs Act of 2010.
    Section 1321 requires promulgation of regulations on subcontracting 
compliance relating to small business concerns, including assignment of 
compliance responsibilities between contracting offices, small business 
offices, and program offices and periodic oversight and review 
activities.
    Section 1322 amends the Small Business Act at 15 U.S.C. 637(d), to 
require a Federal contractor to make a good faith effort to utilize a 
small business subcontractor during performance of a contract to the 
same degree the prime contractor relied on the small business in 
preparing and submitting its bid or proposal. If a prime contractor 
does not utilize a small business subcontractor as described above, the 
prime contractor is required to explain, in writing, to the contracting 
officer the reasons why it is unable to do so.
    These statutory requirements are reflected in the Small Business 
Administration's (SBA's) final rule published at 78 FR 42391 on July 
16, 2013, which did not exempt acquisitions of commercial items.
    The law is silent on the applicability of these requirements to 
acquisitions of commercial items and does not independently provide for 
criminal or civil penalties; nor does it include terms making express 
reference to 41 U.S.C. 1906 and its application to acquisitions of 
commercial items. Therefore, it does not apply to acquisitions of 
commercial items unless the FAR Council makes a written determination 
as provided in 41 U.S.C. 1906.
    The law furthers the Administration's goal of supporting small 
business and advances the interests of small business subcontractors by 
encouraging prime contractors to comply with their stated 
subcontracting objectives. Increased compliance with subcontracting 
objectives will expand opportunities for small business subcontractors. 
Exclusion of a large segment of Federal contracting, such as 
acquisitions for commercial items, will limit the full implementation 
of these subcontracting-related objectives. Further, the primary FAR 
clauses implementing Federal procurement policies governing 
subcontracting with small business, 52.219-8, Utilization of Small 
Business Concerns and 52.219-9, Small Business Subcontracting Plan, are 
currently prescribed for use in solicitations for commercial items. 
This rule merely revises FAR clause 52.219-9 to implement the new 
requirements of sections 1321 and 1322. Exclusion of acquisitions for 
commercial items from these requirements would create confusion among 
contractors and the Federal contracting workforce. The burden on 
contractors would not increase significantly if the new requirements of 
sections 1321 and 1322 were applied to acquisitions for commercial 
items. Under the FAR clauses noted above, contractors are already 
required to commit to objectives for subcontracting with small business 
concerns under contracts for commercial items above the subcontracting 
plan threshold. The effort required for contractors to comply with the 
new requirements will be relatively small.
    For these reasons, it is in the best interest of the Federal 
Government to apply the subcontracting requirements to all contracts 
above the subcontracting plan threshold.

B. Applicability of Contracts for the Acquisition of COTS Items

    Pursuant to 41 U.S.C. 1907, acquisitions of COTS items will be 
exempt from a provision of law unless the law (i) contains criminal or 
civil penalties; (ii) specifically refers to 41 U.S.C. 1907 and states 
that the law applies to acquisitions of COTS items; (iii) concerns 
authorities or responsibilities under the Small Business Act (15 U.S.C. 
644) or bid protest procedures developed under the authority of 31 
U.S.C. 3551 et seq., 10 U.S.C. 2305(e) and (f), or 41 U.S.C. 3706 and 
3707; or (iv) the Administrator for Federal Procurement Policy makes a 
written determination and finding that

[[Page 45842]]

it would not be in the best interest of the Federal Government to 
exempt contracts for the procurement of COTS items from the provision 
of law. If none of these conditions are met, the FAR is required to 
include the statutory requirement(s) on a list of provisions of law 
that are inapplicable to acquisitions of COTS items.
    The purpose of this rule is to implement sections 1321 and 1322 of 
the Small Business Jobs Act of 2010.
    Section 1321 requires promulgation of regulations on subcontracting 
compliance relating to small business concerns, including assignment of 
compliance responsibilities between contracting offices, small business 
offices, and program offices and periodic oversight and review 
activities.
    Section 1322 amends the Small Business Act at 15 U.S.C. 637(d), to 
require a Federal contractor to make a good faith effort to utilize a 
small business subcontractor during performance of a contract to the 
same degree the prime contractor relied on the small business in 
preparing and submitting its bid or proposal. If a prime contractor 
does not utilize a small business subcontractor as described above, the 
prime contractor is required to explain, in writing, to the contracting 
officer the reasons why it is unable to do so.
    These statutory requirements are reflected in the SBA's final rule 
published at 78 FR 42391 on July 16, 2013, which did not exempt 
acquisitions of COTS items.
    The law is silent on the applicability of these requirements to 
acquisitions of COTS items and does not independently provide for 
criminal or civil penalties; nor does it include terms making express 
reference to 41 U.S.C. 1907 and its application to acquisitions of COTS 
items. Therefore, it does not apply to acquisitions of COTS items 
unless the Administrator for Federal Procurement Policy makes a written 
determination as provided in 41 U.S.C. 1907.
    The law furthers the Administration's goal of supporting small 
business and advances the interests of small business subcontractors by 
encouraging prime contractors to comply with their stated 
subcontracting objectives. Increased compliance with subcontracting 
objectives will expand opportunities for small business subcontractors. 
Exclusion of a large segment of Federal contracting, such as 
acquisitions for COTS items, will limit the full implementation of 
these subcontracting-related objectives. Further, the primary FAR 
clauses implementing Federal procurement policies governing 
subcontracting with small business, 52.219-8, Utilization of Small 
Business Concerns and 52.219-9, Small Business Subcontracting Plan, are 
currently prescribed for use in solicitations for COTS items. This rule 
merely revises FAR clause 52.219-9 to implement the new requirements of 
sections 1321 and 1322. Exclusion of acquisitions for commercial items 
from these requirements would create confusion among contractors and 
the Federal contracting workforce. The burden on contractors would not 
increase significantly if the new requirements of sections 1321 and 
1322 were applied to acquisitions for commercial items. Under the FAR 
clauses noted above, contractors are already required to commit to 
objectives for subcontracting with small business concerns under 
contracts for commercial items above the subcontracting plan threshold. 
The effort required for contractors to comply with the new requirements 
will be relatively small.
    For these reasons, it is in the best interest of the Federal 
Government to apply the subcontracting requirements to all contracts 
above the subcontracting plan threshold.

IV. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is a significant regulatory action and, therefore, was subject to 
review under Section 6(b) of E.O. 12866, Regulatory Planning and 
Review, dated September 30, 1993. This rule is not a major rule under 5 
U.S.C. 804.

V. Regulatory Flexibility Act

    DoD, GSA, and NASA have prepared a Final Regulatory Flexibility 
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 
U.S.C. 601, et seq. The FRFA is summarized as follows:

    This final rule amends the FAR to provide uniform guidance on 
small business subcontracting consistent with the Small Business 
Administration's (SBA's) final rule published at 78 FR 42391, on 
July 16, 2013, which implements sections 1321 and 1322 of the Small 
Business Jobs Act of 2010 (Public Law 111-240). SBA's final rule 
also implements other changes intended to help small business 
subcontractors by requiring other than small prime contractors to 
report data on small business subcontracting in connection with 
orders.
    The objectives of this rule are to implement statutory 
requirements, as well as make improvements to increase 
subcontracting opportunities for small businesses.
    This rule may have a positive economic impact on any small 
business entity that wishes to participate in the Federal 
procurement arena as a subcontractor. Analysis of the System for 
Award Management (SAM) database indicates there are over 307,846 
small business registrants. It is unknown how many of these concerns 
participate in small business subcontracting. Firms do not need to 
register in the SAM database to participate in subcontracting. Thus, 
the number of firms participating in subcontracting may be greater 
than or lower than the number of firms registered in the SAM 
database.
    There were no significant issues raised by the public in 
response to the Initial Regulatory Flexibility Analysis provided in 
the proposed rule.
    This rule does not impose any new reporting, recordkeeping or 
other compliance requirements for small businesses.

    Interested parties may obtain a copy of the FRFA from the 
Regulatory Secretariat Division. The Regulatory Secretariat Division 
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of 
SBA.

VI. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The 
rule contains information collection requirements. OMB has cleared 
these information collection requirements under OMB Control Number 
9000-0192, titled: Utilization of Small Business Subcontractors, in the 
amount of 5,328 burden hours; OMB Control Number 9000-0006, titled: 
Subcontracting Plans/Subcontract Report For Individual Contracts, in 
the amount of 2,403,108 burden hours; and OMB Control Number 9000-0007, 
titled: Subcontracting Plans/Summary Subcontract Report, in the amount 
of 534,024 burden hours. No comments were received on the information 
collection requirements so no revisions were made to the collections. 
The burden hours for 9000-0006 and 9000-0007 include both existing 
information collection requirements associated with subcontracting 
plans, as well as the new information collection requirements in this 
rule.

List of Subjects in 48 CFR Parts 1, 2, 15, 19, and 52

    Government procurement.


[[Page 45843]]


    Dated: June 30, 2016.
William Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.
    Therefore, DoD, GSA, and NASA are amending 48 CFR parts 1, 2, 15, 
19, and 52, as set forth below:

0
1. The authority citation for 48 CFR parts 1, 2, 15, 19, and 52 
continues to read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM


1.106  [Amended]

0
2. Amend section 1.106 by removing from the table, FAR segments 
``19.7'' and ``52.219-9'' and their corresponding OMB control numbers 
``9000-0006 and 9000-0007'' and adding, in numerical sequence, FAR 
segments ``19.7'' and ``52.219-9'' and their corresponding OMB control 
numbers ``9000-0192, 9000-0006, and 9000-0007'' in their places.

PART 2--DEFINITIONS OF WORDS AND TERMS

0
3. Amend section 2.101 in paragraph (b)(2) by revising the introductory 
text of the definition ``HUBZone contract'' and the definitions 
``HUBZone small business concern'' and ``Small business subcontractor'' 
to read as follows:


2.101   Definitions.

* * * * *
    HUBZone contract means a contract awarded to a Small Business 
Administration certified ``HUBZone small business concern'' through any 
of the following procurement methods:
* * * * *
    HUBZone small business concern means a small business concern, 
certified by the Small Business Administration (SBA), that appears on 
the List of Qualified HUBZone Small Business Concerns maintained by the 
SBA (13 CFR 126.103).
* * * * *
    Small business subcontractor means a concern that does not exceed 
the size standard for the North American Industry Classification 
Systems code that the prime contractor determines best describes the 
product or service being acquired by the subcontract.
* * * * *

PART 15--CONTRACTING BY NEGOTIATION

0
4. Amend section 15.304 by--
0
a. Revising paragraph (c)(3)(i); and
0
b. Removing from paragraphs (c)(3)(ii) and (c)(4) ``must'' and adding 
``shall'' in their places.
    The revision reads as follows:


15.304   Evaluation factors and significant subfactors.

* * * * *
    (c) * * *
    (3)(i) Past performance, except as set forth in paragraph 
(c)(3)(iii) of this section, shall be evaluated in all source 
selections for negotiated competitive acquisitions expected to exceed 
the simplified acquisition threshold.
* * * * *

PART 19--SMALL BUSINESS PROGRAMS

0
5. Amend section 19.301-2 by revising paragraph (e) to read as follows:


19.301-2   Rerepresentation by a contractor that represented itself as 
a small business concern.

* * * * *
    (e) A change in size status does not change the terms and 
conditions of the contract. However, the contracting officer may 
require a subcontracting plan for a contract containing 52.219-9, Small 
Business Subcontracting Plan, if a prime contractor's size status 
changes from small to other than small as a result of a size 
rerepresentation (see 19.705-2(b)(3)).


19.305  [Amended]

0
6. Amend section 19.305 by removing from paragraph (c) ``19.703(a)(2)'' 
and adding ``19.703(e)'' in its place.
0
7. Amend section 19.701 by--
0
a. Removing the definitions ``Individual contract plan'' and ``Master 
plan''; and
0
b. Adding in alphabetical order definitions for ``Individual 
subcontracting plan'' and ``Master subcontracting plan'' and ``Total 
contract dollars''.
    The additions read as follows:


19.701   Definitions.

* * * * *
    Individual subcontracting plan means 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.
    Master subcontracting plan means a subcontracting plan that 
contains all the required elements of an individual subcontracting 
plan, except goals, and may be incorporated into individual 
subcontracting plans, provided the master subcontracting plan has been 
approved.
* * * * *
    Total contract dollars means the final anticipated dollar value, 
including the dollar value of all options.

0
8. Amend section 19.702 by--
0
a. Removing from the first sentence of the introductory text ``for 
more'' and adding ``with a value greater'' in its place;
0
b. Removing from paragraph (a) introductory text ''Section'' and adding 
``section'' in its place;
0
c. Removing from paragraphs (a)(1) and (2) ``a contract or contract 
modification, that individually is'' and adding ``a contract that is'' 
in their places, respectively;
0
d. Adding paragraph (a)(3); and
0
e. Revising paragraph (b)(4).
    The addition and revision read as follows:


19.702   Statutory requirements.

* * * * *
    (a) * * *
    (3) Each contract modification that causes the value of a contract 
without a subcontracting plan to exceed $700,000 ($1.5 million for 
construction), shall require the contractor to submit a subcontracting 
plan for the contract, if the contracting officer determines that 
subcontracting opportunities exist.
    (b) * * *
    (4) For modifications that are within the scope of the contract and 
the contract does not contain the clause at 52.219-8, Utilization of 
Small Business Concerns.
* * * * *
0
9. Amend section 19.703 by--
0
a. Adding a sentence to the end of paragraph (a)(1);
0
b. Revising paragraphs (a)(2) and (b);
0
c. Removing from paragraph (d)(1) introductory text ``System for Award 
Management'' and adding ``SAM'' in its place;
0
d. Removing from paragraph (d)(1)(i) ``or http://www.sba.gov/hubzone'';
0
e. Removing from paragraph (d)(1)(ii) ``HUB'' and adding ``HUBZone 
Program'' in its place;
0
f. Revising paragraph (d)(2); and
0
g. Adding paragraph (e).
    The additions and revisions read as follows:


19.703  Eligibility requirements for participating in the program.

* * * * *
    (a) * * *
    (1) * * * For subcontracting purposes, a concern is small if it 
does not exceed the size standard for the

[[Page 45844]]

NAICS code that the prime contractor determines best describes the 
product or service being acquired by the subcontract.
    (2)(i) The prime contractor may accept a subcontractor's written 
representations of its size and socioeconomic status as a small 
business, small disadvantaged business, veteran-owned small business, 
service-disabled veteran-owned small business, or a women-owned small 
business, if the subcontractor represents that the size and 
socioeconomic status representation with its offer are current, 
accurate, and complete as of the date of the offer for the 
subcontracts; or
    (ii) The prime contractor may accept a subcontractor's 
representation of its size and socioeconomic status as a small 
business, small disadvantaged business, veteran-owned small business, 
service-disabled veteran-owned small business, or a women-owned small 
business in the System for Award Management (SAM) if--
    (A) The subcontractor is registered in SAM; and
    (B) The subcontractor represents that the size and socioeconomic 
status representations made in SAM are current, accurate and complete 
as of the date of the offer for the subcontract.
    (iii) The prime contractor may not require the use of SAM for the 
purposes of representing size or socioeconomic status in connection 
with a subcontract.
    (iv) In accordance with 13 CFR 121.411, 124.1015, 125.29, 126.900, 
and 127.700, a prime contractor acting in good faith is not liable for 
misrepresentations made by its subcontractors regarding the 
subcontractor's size or socioeconomic status.
    (b) The contractor, the contracting officer, or any other 
interested party can challenge a subcontractor's size status 
representation by filing a protest, in accordance with 13 CFR 121.1001 
through 121.1008.
* * * * *
    (d) * * *
    (2) Protests challenging the socioeconomic status of a HUBZone 
small business concern must be filed in accordance with 13 CFR 126.801.
    (e) The contracting officer or the SBA may protest the 
disadvantaged status of a proposed subcontractor. Protests challenging 
a subcontractor's small disadvantaged business representation must be 
filed in accordance with 13 CFR 124.1007 through 124.1014. Other 
interested parties may submit information to the contracting officer or 
the SBA in an effort to persuade the contracting officer or the SBA to 
initiate a protest. Such protests, in order to be considered timely, 
must be submitted to the SBA prior to completion of performance by the 
intended subcontractor.

0
10. Amend section 19.704 by--
0
a. Revising paragraph (a) introductory text and paragraphs (a)(2) and 
(3);
0
b. Redesignating paragraphs (a)(10)(iii) through (vi) as paragraphs 
(a)(10)(iv) through (vii), respectively;
0
c. Adding new paragraph (a)(10)(iii);
0
d. Removing the semicolon from the end of newly designated paragraph 
(a)(10)(iv) introductory text and adding a period in its place;
0
e. Adding a sentence to the end of the newly designated paragraph 
(a)(10)(iv)(A);
0
f. Revising the newly designated paragraph (a)(10)(iv)(B);
0
g. Removing the periods from the ends of newly designated paragraph 
(a)(10)(vii) and (a)(11) and adding a semicolon in their places, 
respectively; and
0
h. Adding paragraphs (a)(12) through (14);
0
i. Removing from paragraph (b) ``master'' and adding ``master 
subcontracting'' in its place, three times, and removing ``Master'' and 
adding ``Master subcontracting'' in its place, once; and
0
j. Revising paragraph (c).
    The revisions and additions read as follows:


19.704  Subcontracting plan requirements.

    (a) Each subcontracting plan under 19.301-2(e) and 19.702(a)(1), 
(2), and (3) shall include--
* * * * *
    (2) A statement of the total dollars planned to be subcontracted 
and a statement of the total dollars planned to be subcontracted to 
small business (including ANCs and Indian tribes), veteran-owned small 
business, service-disabled veteran-owned small business, HUBZone small 
business, small disadvantaged business (including ANCs and Indian 
tribes) and women-owned small business concerns, as a percentage of 
total subcontract dollars. For individual subcontracting plans only, a 
contracting officer may require the goals referenced in paragraph 
(a)(1) of this section to be calculated as a percentage of total 
contract dollars, in addition to the goals established as a percentage 
of total subcontract dollars;
    (3) A description of the principal types of supplies and services 
to be subcontracted and an identification of types of supplies or 
services planned for subcontracting to small business (including ANCs 
and Indian tribes), veteran-owned small business, service-disabled 
veteran-owned small business, HUBZone small business, small 
disadvantaged business (including ANCs and Indian tribes), and women-
owned small business concerns;
* * * * *
    (10) * * *
    (iii) After November 30, 2017, include subcontracting data for each 
order when reporting subcontracting achievements for indefinite-
delivery, indefinite-quantity contracts intended for use by multiple 
agencies;
    (iv) * * *
    (A) * * * When a contracting officer rejects an ISR, the contractor 
is required to submit a revised ISR within 30 days of receiving the 
notice of the ISR rejection.
    (B) The SSR shall be submitted annually by October 30 for the 
twelve-month period ending September 30. When an SSR is rejected, the 
contractor is required to submit a revised SSR within 30 days of 
receiving the notice of SSR rejection;
* * * * *
    (12) Assurances that the offeror will make a good faith effort to 
acquire articles, equipment, supplies, services, or materials, or 
obtain the performance of construction work from the small business 
concerns that the offeror used in preparing the bid or proposal, in the 
same or greater scope, amount, and quality used in preparing and 
submitting the bid or proposal. Responding to a request for a quote 
does not constitute use in preparing a bid or proposal. An offeror used 
a small business concern in preparing the bid or proposal if--
    (i) The offeror identifies the small business concern as a 
subcontractor in the bid or proposal or associated small business 
subcontracting plan, to furnish certain supplies or perform a portion 
of the contract; or
    (ii) The offeror used the small business concern's pricing or cost 
information or technical expertise in preparing the bid or proposal, 
where there is written evidence of an intent or understanding that the 
small business concern will be awarded a subcontract for the related 
work if the offeror is awarded the contract;
    (13) Assurances that the contractor will provide the contracting 
officer with a written explanation if the contractor fails to acquire 
articles, equipment, supplies, services or materials or obtain the 
performance of construction work as described in (a)(12) of this 
section. This written explanation will be submitted to the contracting 
officer within 30 days of contract completion; and

[[Page 45845]]

    (14) Assurances that the contractor will not prohibit a 
subcontractor from discussing with the contracting officer any material 
matter pertaining to payment to or utilization of a subcontractor.
* * * * *
    (c) For multiyear contracts or contracts containing options, the 
cumulative value of the basic contract and all options is considered in 
determining whether a subcontracting plan is necessary. If a 
subcontracting plan is necessary and the offeror is submitting an 
individual subcontracting plan, the individual subcontracting plan 
shall contain all the elements required by paragraph (a) of this 
section and shall contain separate statements and goals based on total 
subcontract dollars for the basic contract and for each option.
* * * * *

0
11. Amend section 19.705-1 by--
0
a. Revising the section heading;
0
b. Redesignating the text as paragraph (a); and
0
c. Adding paragraph (b).
    The revision and addition read as follows:


19.705-1  General.

* * * * *
    (b)(1) Except where a contractor has a commercial plan, the 
contracting officer shall require a subcontracting plan for each 
indefinite-delivery, indefinite-quantity contract (including task or 
delivery order contracts, FSS, GWACs, and MACs), when the estimated 
value of the contract meets the subcontracting plan thresholds at 
19.702(a)(1) and small business subcontracting opportunities exist.
    (2) Contracting officers placing orders may establish small 
business subcontracting goals for each order. Establishing goals shall 
not be in the form of a new subcontracting plan as a contract may not 
have more than one plan (19.705-2(e)).

0
12. Amend section 19.705-2 by--
0
a. Removing from the introductory text ``must'' and adding ``shall'' in 
its place;
0
b. Revising paragraph (a);
0
c. Adding paragraph (b)(3);
0
d. Revising paragraphs (c) and (e); and
0
e. Adding paragraph (f).
    The revisions and additions read as follows:


19.705-2  Determining the need for a subcontracting plan.

* * * * *
    (a)(1) Determine whether the proposed total contract-dollars will 
exceed the subcontracting plan threshold in 19.702(a).
    (2) Determine whether a proposed modification will cause the total 
contract dollars to exceed the subcontracting plan threshold (see 
19.702(a)).
    (b) * * *
    (3) Whether the firm can acquire any portion of the work with 
minimal or no disruption to performance (with consideration given to 
the time remaining until contract completion), and at fair market 
value, when a determination is made in accordance with paragraph 
(a)(2).
    (c) If it is determined that there are no subcontracting 
possibilities, the determination-shall include a detailed rationale, be 
approved at a level above the contracting officer, and placed in the 
contract file.
* * * * *
    (e) A contract may not have more than one subcontracting plan. 
However, a contracting officer may establish separate subcontracting 
goals for each order under an indefinite-delivery, indefinite-quantity 
contract (19.705-1(b)(2)). When a contract modification exceeds the 
subcontracting plan threshold (see 19.702(a)) or an option is 
exercised, the goals of an existing subcontracting plan shall be 
amended to reflect any new subcontracting opportunities not envisioned 
at the time of contract award. These goal changes do not apply 
retroactively.
    (f) If a subcontracting plan has been added to the contract due to 
a modification (see 19.702(a)(3)) or a size re-representation (see 
19.301-2(e)), the subcontracting goals apply from the date of 
incorporation of the subcontracting plan into the contract and the 
contractor's achievements must be reported on the ISR (or the SF-294, 
if applicable) on a cumulative basis from the date of incorporation of 
the subcontracting plan into the contract.


19.705-4  [Amended]

0
13. Amend section 19.705-4 by removing from paragraph (b) ``11 
required'' and adding ``14 required'' in its place; and removing from 
paragraph (c) ``11 elements'' and adding ``14 elements'' in its place.

0
14. Amend section 19.705-6 by--
0
a. Revising the introductory text;
0
b. Removing from paragraph (a) ``Notifying'' and adding ``Notify'' in 
its place;
0
c. Removing from paragraph (b) ``Forwarding'' and adding ``Forward'' in 
its place;
0
d. Removing from paragraph (c) introductory text ``Giving'' and adding 
``Give'' in its place;
0
e. Removing from paragraph (d) ``Notifying'' and adding ``Notify'' in 
its place;
0
f. Removing from paragraph (e) ``Forwarding'' and adding ``Forward'' in 
its place;
0
g. Redesignating paragraphs (f) through (h) as paragraphs (h) through 
(j), respectively;
0
h. Adding new paragraphs (f) and (g).
0
i. Removing from the newly designated paragraph (h) ''Initiating'' and 
adding ``Initiate'' in its place;
0
j. Removing from the newly designated paragraph (i) ''Taking'' and 
adding ``Take'' in its place; and
0
k. Removing from the newly designated paragraph (j) ``Acknowledging'' 
and ``rejecting'' and adding ``Acknowledge'' and ``reject'' in their 
places, respectively.
    The revisions and additions read as follows:


19.705-6  Postaward responsibilities of the contracting officer.

    After a contract or contract modification containing a 
subcontracting plan is awarded or an existing subcontracting plan is 
amended, the contracting officer shall do the following:
* * * * *
    (f) Monitor the prime contractor's compliance with its 
subcontracting plan, to include the following:
    (1) Ensure that subcontracting reports are submitted into the eSRS 
within 30 days after the report ending date (e.g., by October 30th for 
the fiscal year ended September 30th).
    (2) Review ISRs, and where applicable, SSRs, in eSRS within 60 days 
of the report ending date (e.g., by November 30th for a report 
submitted for the fiscal year ended September 30th).
    (3) Either acknowledge receipt of or reject the reports in 
accordance with subpart 19.7, 52.219-9, Small Business Subcontracting 
Plan, and the eSRS instructions (www.esrs.gov).
    (i) The authority to acknowledge or reject SSRs for commercial 
plans resides with the contracting officer who approved the commercial 
plan.
    (ii) If a report is rejected, the contracting officer must provide 
an explanation for the rejection to allow the prime contractor the 
opportunity to respond specifically to identified deficiencies.
    (g) Evaluate the prime contractor's compliance with its 
subcontracting plan, to include the following:
    (1) Assess whether the prime contractor made a good faith effort to 
comply with its small business subcontracting plan (see 13 CFR 
125.3(d)(3)).

[[Page 45846]]

    (2) Assess the prime contractor's written explanation concerning 
the prime contractor's failure to use a small business concern in the 
performance of the contract in the same scope, amount, and quality used 
in preparing and submitting the bid or proposal, if applicable.
* * * * *

0
15. Amend section 19.708 by--
0
a. Removing the period at the end of paragraphs (b)(1)(i) and (ii) and 
adding a semicolon in their places;
0
b. Removing from paragraph (b)(1)(iii) ``Alternate III.'' and adding 
``Alternate III; or'' in its place;
0
c. Adding paragraph (b)(1)(iv);
0
d. Removing from paragraph (b)(2) ``Alternate I, II, or III.'' and 
adding ``Alternate I, II, III, or IV.'' in its place.
    The addition reads as follows:


19.708  Contract clauses.

* * * * *
    (b)(1) * * *
    (iv) Incorporating a subcontracting plan due to a modification as 
provided for in 19.702(a)(3), the contracting officer shall use the 
clause with its Alternate IV.
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
16. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Revising paragraphs (b)(16) and (17) and the first sentence of 
paragraph (e)(1)(ii); and
0
c. Amending Alternate II by revising the date of the alternate and the 
first sentence of paragraph (e)(1)(ii)(C).
    The revisions read as follows:


52.212-5  Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or 
Executive Orders--Commercial Items (Nov 2016)

* * * * *
    (b) * * *
    __(16) 52.219-8, Utilization of Small Business Concerns (Nov 2016) 
(15 U.S.C. 637(d)(2) and (3)).
    __(17)(i) 52.219-9, Small Business Subcontracting Plan (Nov 2016) 
(15 U.S.C. 637(d)(4)).
    __(ii) Alternate I (Nov 2016) of 52.219-9.
    __(iii) Alternate II (Nov 2016) of 52.219-9.
    __(iv) Alternate III (Nov 2016) of 52.219-9.
    __(v) Alternate IV (Nov 2016) of 52.219-9.
* * * * *
    (e)(1) * * *
    (ii) 52.219-8, Utilization of Small Business Concerns (Nov 2016) 
(15 U.S.C. 637(d)(2) and (3)), in all subcontracts that offer further 
subcontracting opportunities. * * *
* * * * *
    Alternate II (Nov 2016). * * *
    (e)(1) * * *
    (ii) * * *
    (C) 52.219-8, Utilization of Small Business Concerns (Nov 2016) (15 
U.S.C. 637(d)(2) and (3)), in all subcontracts that offer further 
subcontracting opportunities. * * *
* * * * *

0
17. Amend section 52.213-4 by revising the date of the clause and 
paragraph (a)(2)(viii) to read as follows:


52.213-4  Terms and Conditions--Simplified Acquisitions (Other Than 
Commercial Items).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial 
Items) (Nov 2016)

    (a) * * *
    (2) * * *
    (viii) 52.244-6, Subcontracts for Commercial Items (Nov 2016).
* * * * *

0
18. Amend section 52.219-8 by--
0
a. Revising the date of the clause;
0
b. Revising the definition in paragraph (a) of ``HUBZone small business 
concern'';
0
c. Revising paragraph (d)(1);
0
d. Redesignating paragraph (d)(2) as (d)(5); and
0
e. Adding new paragraphs (d)(2) through (4).
    The revisions and additions read as follows:


52.219-8  Utilization of Small Business Concerns.

* * * * *

Utilization of Small Business Concerns (Nov 2016)

    (a) * * *
    HUBZone small business concern means a small business concern, 
certified by the Small Business Administration, that appears on the 
List of Qualified HUBZone Small Business Concerns maintained by the 
Small Business Administration.
* * * * *
    (d)(1) The Contractor may accept a subcontractor's written 
representations of its size and socioeconomic status as a small 
business, small disadvantaged business, veteran-owned small 
business, service-disabled veteran-owned small business, or a women-
owned small business if the subcontractor represents that the size 
and socioeconomic status representations with its offer are current, 
accurate, and complete as of the date of the offer for the 
subcontract.
    (2) The Contractor may accept a subcontractor's representations 
of its size and socioeconomic status as a small business, small 
disadvantaged business, veteran-owned small business, service-
disabled veteran-owned small business, or a women-owned small 
business in the System for Award Management (SAM) if--
    (i) The subcontractor is registered in SAM; and
    (ii) The subcontractor represents that the size and 
socioeconomic status representations made in SAM are current, 
accurate and complete as of the date of the offer for the 
subcontract.
    (3) The Contractor may not require the use of SAM for the 
purposes of representing size or socioeconomic status in connection 
with a subcontract.
    (4) In accordance with 13 CFR 121.411, 124.1015, 125.29, 
126.900, and 127.700, a contractor acting in good faith is not 
liable for misrepresentations made by its subcontractors regarding 
the subcontractor's size or socioeconomic status.

* * * * *

0
19. Amend section 52.219-9 by--
0
a. Revising the clause heading and the date of the clause;
0
b. In paragraph (b), removing the definitions ``Individual contract 
plan'' and ``Master plan''; and adding, in alphabetical order, 
definitions for ``Individual subcontracting plan'' and ``Master 
subcontracting plan'' and ``Total contract dollars''.
0
c. Revising paragraph (c);
0
d. Revising paragraphs (d) introductory text, (d)(1) introductory text, 
paragraph (d)(1)(i), (d)(1)(ii) introductory text, (d)(2)(i), (d)(3) 
introductory text, (d)(5), (d)(6) introductory text, (d)(7) through 
(10), and (d)(11)(iv)(C);
0
e. Adding paragraphs (d)(12) through (14);
0
f. Revising paragraphs (e)(4) and (6);
0
g. Adding paragraph (e)(7);
0
h. Revising paragraphs (f), (i), (k), and (l);
0
i. Revising Alternates I, II, and III; and
0
j. Adding Alternate IV.
    The revisions and additions read as follows:


52.219-9  Small Business Subcontracting Plan.

* * * * *

Small Business Subcontracting Plan (Nov 2016)

* * * * *
    (b) * * *
    Individual subcontracting plan means 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.

[[Page 45847]]

    Master subcontracting plan means a subcontracting plan that 
contains all the required elements of an individual subcontracting 
plan, except goals, and may be incorporated into individual 
subcontracting plans, provided the master subcontracting plan has 
been approved.
* * * * *
    Total contract dollars means the final anticipated dollar value, 
including the dollar value of all options.
    (c)(1) The Offeror, upon request by the Contracting Officer, 
shall submit and negotiate a subcontracting plan, where applicable, 
that separately addresses subcontracting with small business, 
veteran-owned small business, service-disabled veteran-owned small 
business, HUBZone small business, small disadvantaged business, and 
women-owned small business concerns. If the Offeror is submitting an 
individual subcontracting plan, the plan must separately address 
subcontracting with small business, veteran-owned small business, 
service-disabled veteran-owned small business, HUBZone small 
business, small disadvantaged business, and women-owned small 
business concerns, with a separate part for the basic contract and 
separate parts for each option (if any). The subcontracting plan 
shall be included in and made a part of the resultant contract. The 
subcontracting plan shall be negotiated within the time specified by 
the Contracting Officer. Failure to submit and negotiate the 
subcontracting plan shall make the Offeror ineligible for award of a 
contract.
    (2)(i) The Contractor may accept a subcontractor's written 
representations of its size and socioeconomic status as a small 
business, small disadvantaged business, veteran-owned small 
business, service-disabled veteran-owned small business, or a women-
owned small business if the subcontractor represents that the size 
and socioeconomic status representations with its offer are current, 
accurate, and complete as of the date of the offer for the 
subcontract.
    (ii) The Contractor may accept a subcontractor's representations 
of its size and socioeconomic status as a small business, small 
disadvantaged business, veteran-owned small business, service-
disabled veteran-owned small business, or a women-owned small 
business in the System for Award Management (SAM) if--
    (A) The subcontractor is registered in SAM; and
    (B) The subcontractor represents that the size and socioeconomic 
status representations made in SAM are current, accurate and 
complete as of the date of the offer for the subcontract.
    (iii) The Contractor may not require the use of SAM for the 
purposes of representing size or socioeconomic status in connection 
with a subcontract.
    (iv) In accordance with 13 CFR 121.411, 124.1015, 125.29, 
126.900, and 127.700, a contractor acting in good faith is not 
liable for misrepresentations made by its subcontractors regarding 
the subcontractor's size or socioeconomic status.
    (d) The Offeror's subcontracting plan shall include the 
following:
    (1) Separate goals, expressed in terms of total dollars 
subcontracted, and as a percentage of total planned subcontracting 
dollars, for the use of small business, veteran-owned small 
business, service-disabled veteran-owned small business, HUBZone 
small business, small disadvantaged business, and women-owned small 
business concerns as subcontractors. For individual subcontracting 
plans, and if required by the Contracting Officer, goals shall also 
be expressed in terms of percentage of total contract dollars, in 
addition to the goals expressed as a percentage of total subcontract 
dollars. The Offeror shall include all subcontracts that contribute 
to contract performance, and may include a proportionate share of 
products and services that are normally allocated as indirect costs. 
In accordance with 43 U.S.C. 1626--
    (i) Subcontracts awarded to an ANC or Indian tribe shall be 
counted towards the subcontracting goals for small business and 
small disadvantaged business concerns, regardless of the size or 
Small Business Administration certification status of the ANC or 
Indian tribe; and
    (ii) Where one or more subcontractors are in the subcontract 
tier between the prime Contractor and the ANC or Indian tribe, the 
ANC or Indian tribe shall designate the appropriate Contractor(s) to 
count the subcontract towards its small business and small 
disadvantaged business subcontracting goals.
* * * * *
    (2) A statement of--
    (i) Total dollars planned to be subcontracted for an individual 
subcontracting plan; or the Offeror's total projected sales, 
expressed in dollars, and the total value of projected subcontracts 
to support the sales for a commercial plan;
* * * * *
    (3) A description of the principal types of supplies and 
services to be subcontracted, and an identification of the types 
planned for subcontracting to--
* * * * *
    (5) A description of the method used to identify potential 
sources for solicitation purposes (e.g., existing company source 
lists, SAM, veterans service organizations, the National Minority 
Purchasing Council Vendor Information Service, the Research and 
Information Division of the Minority Business Development Agency in 
the Department of Commerce, or small, HUBZone, small disadvantaged, 
and women-owned small business trade associations). A firm may rely 
on the information contained in SAM as an accurate representation of 
a concern's size and ownership characteristics for the purposes of 
maintaining a small, veteran-owned small, service-disabled veteran-
owned small, HUBZone small, small disadvantaged, and women-owned 
small business source list. Use of SAM as its source list does not 
relieve a firm of its responsibilities (e.g., outreach, assistance, 
counseling, or publicizing subcontracting opportunities) in this 
clause.
    (6) A statement as to 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--
* * * * *
    (7) The name of the individual employed by the Offeror who will 
administer the Offeror's subcontracting program, and a description 
of the duties of the individual.
    (8) A description of the efforts the Offeror will make to assure 
that small business, veteran-owned small business, service-disabled 
veteran-owned small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns have 
an equitable opportunity to compete for subcontracts.
    (9) Assurances that the Offeror will include the clause of this 
contract entitled ``Utilization of Small Business Concerns'' in all 
subcontracts that offer further subcontracting opportunities, and 
that the Offeror will require all subcontractors (except small 
business concerns) that receive subcontracts in excess of $700,000 
($1.5 million for construction of any public facility) with further 
subcontracting possibilities to adopt a subcontracting plan that 
complies with the requirements of this clause.
    (10) Assurances that the Offeror will--
    (i) Cooperate in any studies or surveys as may be required;
    (ii) Submit periodic reports so that the Government can 
determine the extent of compliance by the Offeror with the 
subcontracting plan;
    (iii) After November 30, 2017, include subcontracting data for 
each order when reporting subcontracting achievements for 
indefinite-delivery, indefinite-quantity contracts intended for use 
by multiple agencies;
    (iv) Submit the Individual Subcontract Report (ISR) and/or the 
Summary Subcontract Report (SSR), in accordance with paragraph (l) 
of this clause using the Electronic Subcontracting Reporting System 
(eSRS) at http://www.esrs.gov. The reports shall provide information 
on subcontract awards to small business concerns (including ANCs and 
Indian tribes that are not small businesses), veteran-owned small 
business concerns, service-disabled veteran-owned small business 
concerns, HUBZone small business concerns, small disadvantaged 
business concerns (including ANCs and Indian tribes that have not 
been certified by SBA as small disadvantaged businesses), women-
owned small business concerns, and for NASA only, Historically Black 
Colleges and Universities and Minority Institutions. Reporting shall 
be in accordance with this clause, or as provided in agency 
regulations;
    (v) Ensure that its subcontractors with subcontracting plans 
agree to submit the ISR and/or the SSR using eSRS;
    (vi) Provide its prime contract number, its DUNS number, and the 
email address of the Offeror's official responsible for 
acknowledging receipt of or rejecting the ISRs, to all first-tier 
subcontractors with subcontracting plans so they can enter this 
information into the eSRS when submitting their ISRs; and
    (vii) Require that each subcontractor with a subcontracting plan 
provide the prime contract number, its own DUNS number, and

[[Page 45848]]

the email address of the subcontractor's official responsible for 
acknowledging receipt of or rejecting the ISRs, to its 
subcontractors with subcontracting plans.
    (11) * * *
    (iv) * * *
    (C) Conferences and trade fairs to locate small, HUBZone small, 
small disadvantaged, service-disabled veteran-owned, and women-owned 
small business sources; and
* * * * *
    (12) Assurances that the Offeror will make a good faith effort 
to acquire articles, equipment, supplies, services, or materials, or 
obtain the performance of construction work from the small business 
concerns that it used in preparing the bid or proposal, in the same 
or greater scope, amount, and quality used in preparing and 
submitting the bid or proposal. Responding to a request for a quote 
does not constitute use in preparing a bid or proposal. The Offeror 
used a small business concern in preparing the bid or proposal if--
    (i) The Offeror identifies the small business concern as a 
subcontractor in the bid or proposal or associated small business 
subcontracting plan, to furnish certain supplies or perform a 
portion of the subcontract; or
    (ii) The Offeror used the small business concern's pricing or 
cost information or technical expertise in preparing the bid or 
proposal, where there is written evidence of an intent or 
understanding that the small business concern will be awarded a 
subcontract for the related work if the Offeror is awarded the 
contract.
    (13) Assurances that the Contractor will provide the Contracting 
Officer with a written explanation if the Contractor fails to 
acquire articles, equipment, supplies, services or materials or 
obtain the performance of construction work as described in (d)(12) 
of this clause. This written explanation must be submitted to the 
Contracting Officer within 30 days of contract completion.
    (14) Assurances that the Contractor will not prohibit a 
subcontractor from discussing with the Contracting Officer any 
material matter pertaining to payment to or utilization of a 
subcontractor.
    (e) * * *
    (4) Confirm that a subcontractor representing itself as a 
HUBZone small business concern is certified by SBA as a HUBZone 
small business concern in accordance with 52.219-8(d)(2).
* * * * *
    (6) For all competitive subcontracts over the simplified 
acquisition threshold in which a small business concern received a 
small business preference, upon determination of the successful 
subcontract offeror, prior to award of the subcontract the 
Contractor must inform each unsuccessful small business subcontract 
offeror in writing of the name and location of the apparent 
successful offeror and if the successful subcontract offeror is a 
small business, veteran-owned small business, service-disabled 
veteran-owned small business, HUBZone small business, small 
disadvantaged business, or women-owned small business concern.
    (7) Assign each subcontract the NAICS code and corresponding 
size standard that best describes the principal purpose of the 
subcontract.
    (f) A master subcontracting plan on a plant or division-wide 
basis that contains all the elements required by paragraph (d) of 
this clause, except goals, may be incorporated by reference as a 
part of the subcontracting plan required of the Offeror by this 
clause; provided--
    (1) The master subcontracting plan has been approved;
    (2) The Offeror ensures that the master subcontracting plan is 
updated as necessary and provides copies of the approved master 
subcontracting plan, including evidence of its approval, to the 
Contracting Officer; and
    (3) Goals and any deviations from the master subcontracting plan 
deemed necessary by the Contracting Officer to satisfy the 
requirements of this contract are set forth in the individual 
subcontracting plan.
* * * * *
    (i) A contract may have no more than one subcontracting plan. 
When a contract modification exceeds the subcontracting plan 
threshold in 19.702(a), or an option is exercised, the goals of the 
existing subcontracting plan shall be amended to reflect any new 
subcontracting opportunities. When the goals in a subcontracting 
plan are amended, these goal changes do not apply retroactively.
* * * * *
    (k) The failure of the Contractor or subcontractor to comply in 
good faith with (1) the clause of this contract entitled 
``Utilization Of Small Business Concerns,'' or (2) an approved plan 
required by this clause, shall be a material breach of the contract 
and may be considered in any past performance evaluation of the 
Contractor.
    (l) The Contractor shall submit ISRs and SSRs using the web-
based eSRS at http://www.esrs.gov. Purchases from a corporation, 
company, or subdivision that is an affiliate of the Contractor or 
subcontractor are not included in these reports. Subcontract awards 
by affiliates shall be treated as subcontract awards by the 
Contractor. Subcontract award data reported by the Contractor and 
subcontractors shall be limited to awards made to their immediate 
next-tier subcontractors. Credit cannot be taken for awards made to 
lower tier subcontractors, unless the Contractor or subcontractor 
has been designated to receive a small business or small 
disadvantaged business credit from an ANC or Indian tribe. Only 
subcontracts involving performance in the United States or its 
outlying areas should be included in these reports with the 
exception of subcontracts under a contract awarded by the State 
Department or any other agency that has statutory or regulatory 
authority to require subcontracting plans for subcontracts performed 
outside the United States and its outlying areas.
    (1) ISR. This report is not required for commercial plans. The 
report is required for each contract containing an individual 
subcontracting plan.
    (i) The report shall be submitted semi-annually during contract 
performance for the periods ending March 31 and September 30. A 
report is also required for each contract within 30 days of contract 
completion. Reports are due 30 days after the close of each 
reporting period, unless otherwise directed by the Contracting 
Officer. Reports are required when due, regardless of whether there 
has been any subcontracting activity since the inception of the 
contract or the previous reporting period. When the Contracting 
Officer rejects an ISR, the Contractor shall submit a corrected 
report within 30 days of receiving the notice of ISR rejection.
    (ii)(A) When a subcontracting plan contains separate goals for 
the basic contract and each option, as prescribed by FAR 19.704(c), 
the dollar goal inserted on this report shall be the sum of the base 
period through the current option; for example, for a report 
submitted after the second option is exercised, the dollar goal 
would be the sum of the goals for the basic contract, the first 
option, and the second option.
    (B) If a subcontracting plan has been added to the contract 
pursuant to 19.702(a)(3) or 19.301-2(e), the Contractor's 
achievements must be reported in the ISR on a cumulative basis from 
the date of incorporation of the subcontracting plan into the 
contract.
    (iii) When a subcontracting plan includes indirect costs in the 
goals, these costs must be included in this report.
    (iv) The authority to acknowledge receipt or reject the ISR 
resides--
    (A) In the case of the prime Contractor, with the Contracting 
Officer; and
    (B) In the case of a subcontract with a subcontracting plan, 
with the entity that awarded the subcontract.
    (2) SSR. (i) Reports submitted under individual subcontracting 
plans.
    (A) This report encompasses all subcontracting under prime 
contracts and subcontracts with an executive agency, regardless of 
the dollar value of the subcontracts. This report also includes 
indirect costs on a prorated basis when the indirect costs are 
excluded from the subcontracting goals.
    (B) The report may be submitted on a corporate, company or 
subdivision (e.g. plant or division operating as a separate profit 
center) basis, unless otherwise directed by the agency.
    (C) If the Contractor or a subcontractor is performing work for 
more than one executive agency, a separate report shall be submitted 
to each executive agency covering only that agency's contracts, 
provided at least one of that agency's contracts is over $700,000 
(over $1.5 million for construction of a public facility) and 
contains a subcontracting plan. For DoD, a consolidated report shall 
be submitted for all contracts awarded by military departments/
agencies and/or subcontracts awarded by DoD prime contractors.
    (D) The report shall be submitted annually by October 30 for the 
twelve month period ending September 30. When a Contracting Officer 
rejects an SSR, the Contractor shall submit a revised report within 
30 days of receiving the notice of SSR rejection.
    (E) Subcontract awards that are related to work for more than 
one executive agency shall be appropriately allocated.

[[Page 45849]]

    (F) The authority to acknowledge or reject SSRs in eSRS, 
including SSRs submitted by subcontractors with subcontracting 
plans, resides with the Government agency awarding the prime 
contracts unless stated otherwise in the contract.
    (ii) Reports submitted under a commercial plan.
    (A) The report shall include all subcontract awards under the 
commercial plan in effect during the Government's fiscal year and 
all indirect costs.
    (B) The report shall be submitted annually, within thirty days 
after the end of the Government's fiscal year.
    (C) If a Contractor has a commercial plan and is performing work 
for more than one executive agency, the Contractor shall specify the 
percentage of dollars attributable to each agency.
    (D) The authority to acknowledge or reject SSRs for commercial 
plans resides with the Contracting Officer who approved the 
commercial plan.

    (End of clause)

    Alternate I (Nov 2016). As prescribed in 19.708(b)(1)(i), 
substitute the following paragraph (c)(1) for paragraph (c)(1) of 
the basic clause:
    (c)(1) The apparent low bidder, upon request by the Contracting 
Officer, shall submit a subcontracting plan, where applicable, that 
separately addresses subcontracting with small business, veteran-
owned small business, service-disabled veteran-owned small business, 
HUBZone small business, small disadvantaged business, and women-
owned small business concerns. If the bidder is submitting an 
individual subcontracting plan, the plan must separately address 
subcontracting with small business, veteran-owned small business, 
service-disabled veteran-owned small business, HUBZone small 
business, small disadvantaged business, and women-owned small 
business concerns, with a separate part for the basic contract and 
separate parts for each option (if any). The plan shall be included 
in and made a part of the resultant contract. The subcontracting 
plan shall be submitted within the time specified by the Contracting 
Officer. Failure to submit the subcontracting plan shall make the 
bidder ineligible for the award of a contract.
    Alternate II (Nov 2016). As prescribed in 19.708(b)(1)(ii), 
substitute the following paragraph (c)(1) for paragraph (c)(1) of 
the basic clause:
    (c)(1) Proposals submitted in response to this solicitation 
shall include a subcontracting plan that separately addresses 
subcontracting with small business, veteran-owned small business, 
service-disabled veteran-owned small business, HUBZone small 
business, small disadvantaged business, and women-owned small 
business concerns. If the Offeror is submitting an individual 
subcontracting plan, the plan must separately address subcontracting 
with small business, veteran-owned small business, service-disabled 
veteran-owned small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns, 
with a separate part for the basic contract and separate parts for 
each option (if any). The plan shall be included in and made a part 
of the resultant contract. The subcontracting plan shall be 
negotiated within the time specified by the Contracting Officer. 
Failure to submit and negotiate a subcontracting plan shall make the 
Offeror ineligible for award of a contract.
    Alternate III (Nov 2016). As prescribed in 19.708(b)(1)(iii), 
substitute the following paragraphs (d)(10) and (l) for paragraphs 
(d)(10) and (l) in the basic clause;
    (d)(10) Assurances that the Offeror will--
    (i) Cooperate in any studies or surveys as may be required;
    (ii) Submit periodic reports so that the Government can 
determine the extent of compliance by the Offeror with the 
subcontracting plan;
    (iii) Submit Standard Form (SF) 294 Subcontracting Report for 
Individual Contract in accordance with paragraph (l) of this clause. 
Submit the Summary Subcontract Report (SSR), in accordance with 
paragraph (l) of this clause using the Electronic Subcontracting 
Reporting System (eSRS) at http://www.esrs.gov. The reports shall 
provide information on subcontract awards to small business concerns 
(including ANCs and Indian tribes that are not small businesses), 
veteran-owned small business concerns, service-disabled veteran-
owned small business concerns, HUBZone small business concerns, 
small disadvantaged business concerns (including ANCs and Indian 
tribes that have not been certified by the Small Business 
Administration as small disadvantaged businesses), women-owned small 
business concerns, and for NASA only, Historically Black Colleges 
and Universities and Minority Institutions. Reporting shall be in 
accordance with this clause, or as provided in agency regulations; 
and
    (iv) Ensure that its subcontractors with subcontracting plans 
agree to submit the SF 294 in accordance with paragraph (l) of this 
clause. Ensure that its subcontractors with subcontracting plans 
agree to submit the SSR in accordance with paragraph (l) of this 
clause using the eSRS.
    (l) The Contractor shall submit a SF 294. The Contractor shall 
submit SSRs using the web-based eSRS at http://www.esrs.gov. 
Purchases from a corporation, company, or subdivision that is an 
affiliate of the Contractor or subcontractor are not included in 
these reports. Subcontract awards by affiliates shall be treated as 
subcontract awards by the Contractor. Subcontract award data 
reported by the Contractor and subcontractors shall be limited to 
awards made to their immediate next-tier subcontractors. Credit 
cannot be taken for awards made to lower tier subcontractors, unless 
the Contractor or subcontractor has been designated to receive a 
small business or small disadvantaged business credit from an ANC or 
Indian tribe. Only subcontracts involving performance in the U.S. or 
its outlying areas should be included in these reports with the 
exception of subcontracts under a contract awarded by the State 
Department or any other agency that has statutory or regulatory 
authority to require subcontracting plans for subcontracts performed 
outside the United States and its outlying areas.
    (1) SF 294. This report is not required for commercial plans. 
The report is required for each contract containing an individual 
subcontracting plan. For Contractors the report shall be submitted 
to the Contracting Officer, or as specified elsewhere in this 
contract. In the case of a subcontract with a subcontracting plan, 
the report shall be submitted to the entity that awarded the 
subcontract.
    (i) The report shall be submitted semi-annually during contract 
performance for the periods ending March 31 and September 30. A 
report is also required for each contract within 30 days of contract 
completion. Reports are due 30 days after the close of each 
reporting period, unless otherwise directed by the Contracting 
Officer. Reports are required when due, regardless of whether there 
has been any subcontracting activity since the inception of the 
contract or the previous reporting period. When a Contracting 
Officer rejects a report, the Contractor shall submit a revised 
report within 30 days of receiving the notice of report rejection.
    (ii)(A) When a subcontracting plan contains separate goals for 
the basic contract and each option, as prescribed by FAR 19.704(c), 
the dollar goal inserted on this report shall be the sum of the base 
period through the current option; for example, for a report 
submitted after the second option is exercised, the dollar goal 
would be the sum of the goals for the basic contract, the first 
option, and the second option.
    (B) If a subcontracting plan has been added to the contract 
pursuant to 19.702(a)(3) or 19.301-2(e), the Contractor's 
achievements must be reported in the report on a cumulative basis 
from the date of incorporation of the subcontracting plan into the 
contract.
    (iii) When a subcontracting plan includes indirect costs in the 
goals, these costs must be included in this report.
    (2) SSR. (i)Reports submitted under individual subcontracting 
plans.
    (A) This report encompasses all subcontracting under prime 
contracts and subcontracts with an executive agency, regardless of 
the dollar value of the subcontracts. This report also includes 
indirect costs on a prorated basis when the indirect costs are 
excluded from the subcontracting goals.
    (B) The report may be submitted on a corporate, company or 
subdivision (e.g., plant or division operating as a separate profit 
center) basis, unless otherwise directed by the agency.
    (C) If the Contractor and/or a subcontractor is performing work 
for more than one executive agency, a separate report shall be 
submitted to each executive agency covering only that agency's 
contracts, provided at least one of that agency's contracts is over 
$700,000 (over $1.5 million for construction of a public facility) 
and contains a subcontracting plan. For DoD, a consolidated report 
shall be submitted for all contracts awarded by military 
departments/agencies and/or subcontracts awarded by DoD prime 
contractors.

[[Page 45850]]

    (D) The report shall be submitted annually by October 30, for 
the twelve month period ending September 30. When a Contracting 
Officer rejects an SSR, the Contractor is required to submit a 
revised SSR within 30 days of receiving the notice of report 
rejection.
    (E) Subcontract awards that are related to work for more than 
one executive agency shall be appropriately allocated.
    (F) The authority to acknowledge or reject SSRs in the eSRS, 
including SSRs submitted by subcontractors with subcontracting 
plans, resides with the Government agency awarding the prime 
contracts unless stated otherwise in the contract.
    (ii) Reports submitted under a commercial plan.
    (A) The report shall include all subcontract awards under the 
commercial plan in effect during the Government's fiscal year and 
all indirect costs.
    (B) The report shall be submitted annually, within 30 days after 
the end of the Government's fiscal year.
    (C) If a Contractor has a commercial plan and is performing work 
for more than one executive agency, the Contractor shall specify the 
percentage of dollars attributable to each agency.
    (D) The authority to acknowledge or reject SSRs for commercial 
plans resides with the Contracting Officer who approved the 
commercial plan.
    Alternate IV (Nov 2016). As prescribed in 19.708(b)(1)(iv), 
substitute the following paragraphs (c) and (d) for paragraphs (c) 
and (d) of the basic clause:
    (c)(1) The Contractor, upon request by the Contracting Officer, 
shall submit and negotiate a subcontracting plan, where applicable, 
that separately addresses subcontracting with small business, 
veteran-owned small business, service-disabled veteran-owned small 
business, HUBZone small business, small disadvantaged business, and 
women-owned small business concerns. If the Contractor is submitting 
an individual subcontracting plan, the plan shall separately address 
subcontracting with small business, veteran-owned small business, 
service-disabled veteran-owned small business, HUBZone small 
business, small disadvantaged business, and women-owned small 
business concerns, with a separate part for the basic contract and 
separate parts for each option (if any). The subcontracting plan 
shall be incorporated into the contract. The subcontracting plan 
shall be negotiated within the time specified by the Contracting 
Officer. The subcontracting plan does not apply retroactively.
    (2)(i) The prime Contractor may accept a subcontractor's written 
representations of its size and socioeconomic status as a small 
business, small disadvantaged business, veteran-owned small 
business, service-disabled veteran-owned small business, or a women-
owned small business if the subcontractor represents that the size 
and socioeconomic status representations with its offer are current, 
accurate, and complete as of the date of the offer for the 
subcontract.
    (ii) The Contractor may accept a subcontractor's representations 
of its size and socioeconomic status as a small business, small 
disadvantaged business, veteran-owned small business, service-
disabled veteran-owned small business, or a women-owned small 
business in the System for Award Management (SAM) if--
    (A) The subcontractor is registered in SAM; and
    (B) The subcontractor represents that the size and socioeconomic 
status representations made in SAM are current, accurate and 
complete as of the date of the offer for the subcontract.
    (iii) The Contractor may not require the use of SAM for the 
purposes of representing size or socioeconomic status in connection 
with a subcontract.
    (iv) In accordance with 13 CFR 121.411, 124.1015, 125.29, 
126.900, and 127.700, a contractor acting in good faith is not 
liable for misrepresentations made by its subcontractors regarding 
the subcontractor's size or socioeconomic status.
    (d) The Contractor's subcontracting plan shall include the 
following:
    (1) Separate goals, expressed in terms of total dollars 
subcontracted and as a percentage of total planned subcontracting 
dollars, for the use of small business, veteran-owned small 
business, service-disabled veteran-owned small business, HUBZone 
small business, small disadvantaged business, and women-owned small 
business concerns as subcontractors. For individual subcontracting 
plans, and if required by the Contracting Officer, goals shall also 
be expressed in terms of percentage of total contract dollars, in 
addition to the goals expressed as a percentage of total subcontract 
dollars. The Contractor shall include all subcontracts that 
contribute to contract performance, and may include a proportionate 
share of products and services that are normally allocated as 
indirect costs. In accordance with 43 U.S.C. 1626--
    (i) Subcontracts awarded to an ANC or Indian tribe shall be 
counted towards the subcontracting goals for small business and 
small disadvantaged business concerns, regardless of the size or 
Small Business Administration certification status of the ANC or 
Indian tribe; and
    (ii) Where one or more subcontractors are in the subcontract 
tier between the prime Contractor and the ANC or Indian tribe, the 
ANC or Indian tribe shall designate the appropriate Contractor(s) to 
count the subcontract towards its small business and small 
disadvantaged business subcontracting goals.
    (A) In most cases, the appropriate Contractor is the Contractor 
that awarded the subcontract to the ANC or Indian tribe.
    (B) If the ANC or Indian tribe designates more than one 
Contractor to count the subcontract toward its goals, the ANC or 
Indian tribe shall designate only a portion of the total subcontract 
award to each Contractor. The sum of the amounts designated to 
various Contractors cannot exceed the total value of the 
subcontract.
    (C) The ANC or Indian tribe shall give a copy of the written 
designation to the Contracting Officer, the Contractor, and the 
subcontractors in between the prime Contractor and the ANC or Indian 
tribe within 30 days of the date of the subcontract award.
    (D) If the Contracting Officer does not receive a copy of the 
ANC's or the Indian tribe's written designation within 30 days of 
the subcontract award, the Contractor that awarded the subcontract 
to the ANC or Indian tribe will be considered the designated 
Contractor.
    (2) A statement of--
    (i) Total dollars planned to be subcontracted for an individual 
subcontracting plan; or the Contractor's total projected sales, 
expressed in dollars, and the total value of projected subcontracts 
to support the sales for a commercial plan;
    (ii) Total dollars planned to be subcontracted to small business 
concerns (including ANC and Indian tribes);
    (iii) Total dollars planned to be subcontracted to veteran-owned 
small business concerns;
    (iv) Total dollars planned to be subcontracted to service-
disabled veteran-owned small business;
    (v) Total dollars planned to be subcontracted to HUBZone small 
business concerns;
    (vi) Total dollars planned to be subcontracted to small 
disadvantaged business concerns (including ANCs and Indian tribes); 
and
    (vii) Total dollars planned to be subcontracted to women-owned 
small business concerns.
    (3) A description of the principal types of supplies and 
services to be subcontracted, and an identification of the types 
planned for subcontracting to--
    (i) Small business concerns;
    (ii) Veteran-owned small business concerns;
    (iii) Service-disabled veteran-owned small business concerns;
    (iv) HUBZone small business concerns;
    (v) Small disadvantaged business concerns; and
    (vi) Women-owned small business concerns.
    (4) A description of the method used to develop the 
subcontracting goals in paragraph (d)(1) of this clause.
    (5) A description of the method used to identify potential 
sources for solicitation purposes (e.g., existing company source 
lists, SAM, veterans service organizations, the National Minority 
Purchasing Council Vendor Information Service, the Research and 
Information Division of the Minority Business Development Agency in 
the Department of Commerce, or small, HUBZone, small disadvantaged, 
and women-owned small business trade associations). The Contractor 
may rely on the information contained in SAM as an accurate 
representation of a concern's size and ownership characteristics for 
the purposes of maintaining a small, veteran-owned small, service-
disabled veteran-owned small, HUBZone small, small disadvantaged, 
and women-owned small business source list. Use of SAM as its source 
list does not relieve a firm of its responsibilities (e.g., 
outreach, assistance, counseling, or publicizing subcontracting 
opportunities) in this clause.
    (6) A statement as to whether or not the Contractor included 
indirect costs in

[[Page 45851]]

establishing subcontracting goals, and a description of the method 
used to determine the proportionate share of indirect costs to be 
incurred with--
    (i) Small business concerns (including ANC and Indian tribes);
    (ii) Veteran-owned small business concerns;
    (iii) Service-disabled veteran-owned small business concerns;
    (iv) HUBZone small business concerns;
    (v) Small disadvantaged business concerns (including ANC and 
Indian tribes); and
    (vi) Women-owned small business concerns.
    (7) The name of the individual employed by the Contractor who 
will administer the Contractor's subcontracting program, and a 
description of the duties of the individual.
    (8) A description of the efforts the Contractor will make to 
assure that small business, veteran-owned small business, service-
disabled veteran-owned small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns have 
an equitable opportunity to compete for subcontracts.
    (9) Assurances that the Contractor will include the clause of 
this contract entitled ``Utilization of Small Business Concerns'' in 
all subcontracts that offer further subcontracting opportunities, 
and that the Contractor will require all subcontractors (except 
small business concerns) that receive subcontracts in excess of 
$700,000 ($1.5 million for construction of any public facility) with 
further subcontracting possibilities to adopt a subcontracting plan 
that complies with the requirements of this clause.
    (10) Assurances that the Contractor will--
    (i) Cooperate in any studies or surveys as may be required;
    (ii) Submit periodic reports so that the Government can 
determine the extent of compliance by the Contractor with the 
subcontracting plan;
    (iii) After November 30, 2017, include subcontracting data for 
each order when reporting subcontracting achievements for an 
indefinite-delivery, indefinite-quantity contract intended for use 
by multiple agencies;
    (iv) Submit the Individual Subcontract Report (ISR) and/or the 
Summary Subcontract Report (SSR), in accordance with paragraph (l) 
of this clause using the Electronic Subcontracting Reporting System 
(eSRS) at http://www.esrs.gov. The reports shall provide information 
on subcontract awards to small business concerns (including ANCs and 
Indian tribes that are not small businesses), veteran-owned small 
business concerns, service-disabled veteran-owned small business 
concerns, HUBZone small business concerns, small disadvantaged 
business concerns (including ANCs and Indian tribes that have not 
been certified by SBA as small disadvantaged businesses), women-
owned small business concerns, and for NASA only, Historically Black 
Colleges and Universities and Minority Institutions. Reporting shall 
be in accordance with this clause, or as provided in agency 
regulations;
    (v) Ensure that its subcontractors with subcontracting plans 
agree to submit the ISR and/or the SSR using eSRS;
    (vi) Provide its prime contract number, its DUNS number, and the 
email address of the Contractor's official responsible for 
acknowledging receipt of or rejecting the ISRs, to all first-tier 
subcontractors with subcontracting plans so they can enter this 
information into the eSRS when submitting their ISRs; and
    (vii) Require that each subcontractor with a subcontracting plan 
provide the prime contract number, its own DUNS number, and the 
email address of the subcontractor's official responsible for 
acknowledging receipt of or rejecting the ISRs, to its 
subcontractors with subcontracting plans.
    (11) A description of the types of records that will be 
maintained concerning procedures that have been adopted to comply 
with the requirements and goals in the plan, including establishing 
source lists; and a description of the Contractor's efforts to 
locate small business, veteran-owned small business, service-
disabled veteran-owned small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns and 
award subcontracts to them. The records shall include at least the 
following (on a plant-wide or company-wide basis, unless otherwise 
indicated):
    (i) Source lists (e.g., SAM), guides, and other data that 
identify small business, veteran-owned small business, service-
disabled veteran-owned small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns.
    (ii) Organizations contacted in an attempt to locate sources 
that are small business, veteran-owned small business, service-
disabled veteran-owned small business, HUBZone small business, small 
disadvantaged business, or women-owned small business concerns.
    (iii) Records on each subcontract solicitation resulting in an 
award of more than $150,000, indicating--
    (A) Whether small business concerns were solicited and, if not, 
why not;
    (B) Whether veteran-owned small business concerns were solicited 
and, if not, why not;
    (C) Whether service-disabled veteran-owned small business 
concerns were solicited and, if not, why not;
    (D) Whether HUBZone small business concerns were solicited and, 
if not, why not;
    (E) Whether small disadvantaged business concerns were solicited 
and, if not, why not;
    (F) Whether women-owned small business concerns were solicited 
and, if not, why not; and
    (G) If applicable, the reason award was not made to a small 
business concern.
    (iv) Records of any outreach efforts to contact--
    (A) Trade associations;
    (B) Business development organizations;
    (C) Conferences and trade fairs to locate small, HUBZone small, 
small disadvantaged, service-disabled veteran-owned, and women-owned 
small business sources; and
    (D) Veterans service organizations.
    (v) Records of internal guidance and encouragement provided to 
buyers through--
    (A) Workshops, seminars, training, etc.; and
    (B) Monitoring performance to evaluate compliance with the 
program's requirements.
    (vi) On a contract-by-contract basis, records to support award 
data submitted by the Contractor to the Government, including the 
name, address, and business size of each subcontractor. Contractors 
having commercial plans need not comply with this requirement.
    (12) Assurances that the Contractor will make a good faith 
effort to acquire articles, equipment, supplies, services, or 
materials, or obtain the performance of construction work from the 
small business concerns that it used in preparing the proposal for 
the modification, in the same or greater scope, amount, and quality 
used in preparing and submitting the modification proposal. 
Responding to a request for a quote does not constitute use in 
preparing a proposal. The Contractor used a small business concern 
in preparing the proposal for a modification if--
    (i) The Contractor identifies the small business concern as a 
subcontractor in the proposal or associated small business 
subcontracting plan, to furnish certain supplies or perform a 
portion of the subcontract; or
    (ii) The Contractor used the small business concern's pricing or 
cost information or technical expertise in preparing the proposal, 
where there is written evidence of an intent or understanding that 
the small business concern will be awarded a subcontract for the 
related work when the modification is executed.
    (13) Assurances that the Contractor will provide the Contracting 
Officer with a written explanation if the Contractor fails to 
acquire articles, equipment, supplies, services or materials or 
obtain the performance of construction work as described in (d)(12) 
of this clause. This written explanation must be submitted to the 
Contracting Officer within 30 days of contract completion.
    (14) Assurances that the Contractor will not prohibit a 
subcontractor from discussing with the contracting officer any 
material matter pertaining to the payment to or utilization of a 
subcontractor.

0
20. Amend section 52.244-6 by revising the date of the clause and the 
first sentence of paragraph (c)(1)(iii) to read as follows:


52.244-6  Subcontracts for Commercial Items.

* * * * *

Subcontracts for Commercial Items (Nov 2016)

* * * * *
    (c)(1) * * *
    (iii) 52.219-8, Utilization of Small Business Concerns (Nov 2016) 
(15 U.S.C. 637(d)(2) and (3)), if the subcontract offers further 
subcontracting opportunities.
* * * * *
[FR Doc. 2016-16245 Filed 7-13-16; 8:45 am]
 BILLING CODE 6820-EP-P