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Small Business Subcontracting Plans &Evaluation of Small Business Participation Summary of ConsiderationsAlthough a set-aside is the preferred means of maximizing contracting opportunities for small businesses as prime contractors, when market research does not support this approach, consideration must be given to providing maximum opportunity to small businesses through subcontracting. This document summarizes considerations that should be taken into account in developing a subcontracting strategy that maximizes opportunities for small businesses for an acquisition. Scenario -. For an acquisition valued at $110.5M, the acquisition approach as documented on the DD form 2579 recommends Full and Open Competition (F&OC) and is supported by a Market Research Report. What should be considered to develop an optimal subcontracting strategy?Subcontracting PlanSubcontracting Plan RequirementFAR 19.702 requires that all negotiated and sealed bid acquisitions that are expected to exceed $700,000 ($1.5 million for construction) and that has subcontracting possibilities, shall require the apparently successful offeror/ bidder selected for award to submit an acceptable subcontracting plan (see FAR 19.702(b) for exceptions). Subcontracting Plans can be negotiated to achieve acceptability. It is important to note that if the apparently successful offeror fails to negotiate a subcontracting plan acceptable to the contracting officer within the time limit prescribed by the contracting officer, the offeror will be ineligible for award.Consider when subcontracting plans will be submitted and the government’s subcontracting objectives:Requiring submission of the subcontracting plan with the bids or proposals (vice any other time before contract award). Note: It is customary for the Contracting Officer to require offerors/bidders to submit a subcontracting plan with its offer/bid, though FAR permits its submission within the (any) time limit prescribed by the contracting officer before contract award.Determine (based on the market research), desired acceptable subcontracting goals Determine (based on the market research), anticipated areas suitable for subcontractingEvaluation of Small Business ParticipationEvaluation of Small Business Participation RequirementFAR 15.304(c)(4) requires evaluation of small business participation for solicitations involving consolidation or bundling. However, DFARS 215.304(c) requires evaluation of small business participation in other than Lowest Priced Technically Acceptable (LPTA) source selections whenever a subcontracting plan is required. Thus in such instance, the contracting officer, must include in the solicitation evaluation criteria (factors/significant subfactors) that incentivize small business utilization. Note: Though evaluation of small business participation is not required for LPTA source selections, it is permissible. See the Source Selection Procedures Appendix C (C.4).DFARS PGI 215.304(c)(i)(A) provides the following examples (these are not the only criteria that can be used) as small business participation evaluation factors and significant subfactors (criteria): The extent to which such firms are specifically identified in proposals;The extent of commitment to use such firms (for example, enforceable commitments are to be weighted more heavily than non-enforceable ones)The complexity and variety of the work small firms are to performPast performance of the offerors in complying with requirements of the clauses at FAR 52.219-8, Utilization of Small Business Concerns, and 52.219-9 Small Business Subcontracting Plan (evaluation may be under the small business participation factor/subfactor or under the past performance factor)The extent of participation of such firms in terms of the value of the total acquisition andThe realism of the proposalNote that the above criteria are examples only; the factors/ significant subfactors to be evaluated should be based on the requirement and what makes sense and will be meaningful for the acquisition. Think of it in terms of what would be beneficial contractually. In other words, if an offeror proposed it, it would have significance for the requirement with benefit to the agency/DoD.The purpose of the small business participation evaluation criteria is to ensure the firm(s) receiving the Government award, whether they be an-other-than small business or small business (to include small businesses in all socioeconomic categories), will utilize small businesses in performance of the contract. The emphasis is on getting the prime contractor to include small businesses in proposal development and to ensure that those small businesses are actually awarded subcontracts. Determine an appropriate small business evaluation level and rating methodology.Evaluation and Rating of Small Business ParticipationThe “Department of Defense Source Selection Procedures” (DDSSP) specifies three alternatives (levels) for evaluating and rating small business participation.Establish a separate small business participation evaluation factor (DDSSP section 2.3.4.2.3 & 3.1.4.2)Example:Section M – Evaluation Factors Factor 1 TechnicalFactor 2 Past PerformanceFactor 3 Small Business ParticipationFactor 4 CostWhen evaluating small business participation as a separate evaluation factor there are two rating options as follows (DDSSP section 3.1.4.1):Utilize all ratings outlined in Table 6 of the source selection procedures guide. orUse the ratings acceptable and unacceptable only as defined in Table 6.Establish a small business participation subfactor under the technical factor (DDSSP section 2.3.4.2.3 & 3.1.4.2)Example:Section M – Evaluation FactorsFactor 1 TechnicalSubfactor a. Management ApproachSubfactor b. Small Business ParticipationWhen evaluating small business participation as a subfactor under the technical factor there are two rating options as follows: (DDSSP section 3.1.4.1):Utilize all ratings outlined in Table 6 of the source selection procedures guide. orUse the ratings acceptable and unacceptable only as defined in Table 6.Evaluate small business participation within the evaluation of a technical subfactor (DDSSP section 2.3.4.2.3)Example:Section M – Evaluation FactorsFactor 1 TechnicalSubfactor a. Management ApproachConsideration of small business participationWhen small business participation is evaluated within the evaluation of a technical subfactor, a separate small business rating is not applied (DDSSP section 3.1.4.2). However, the small business participation shall be considered in determining the appropriate technical rating to be applied. A point to ponder - Though it is permissible to evaluate small business participation at a subfactor or lower level, to be the most meaningful, the greater the opportunity for utilization of small businesses, small business participation should be evaluated at the factor level.Small Business Participation and Solicitations, Source Selection, and Contract AwardA point to ponder – Evaluation of small business participation and submission of a subcontracting plan are two separate yet related areas; they are treated differently in the solicitation, source selection, and contract award. The Subcontracting Plan is not submitted for the purpose of complying with source selection evaluation criterion, but as a matter to be eligible to receive a contract award (basis for award). As such, subcontracting plans are not “evaluated” as part of the source selection, but assessed for acceptability (they may be negotiated if necessary to achieve acceptability). On the other hand, small business participation is an evaluation criterion. Considerations that will strengthen small business utilization and adequate treatment during solicitation, source selection and contract award. To underscore the significance of small business participation, a good solicitation and source selection evaluation will:Emphasize how the assessment of the subcontracting plan IAW FAR 19.7 is different from the evaluation of small business participation Explain how proposals, including those from small business prime offerors, must be structured and how they will be evaluated (if different from those from other than small businesses)State that evaluation of small business participation applies to Commercial Subcontracting Plan holders and Comprehensive Subcontracting Plan participants If appropriate for the acquisition, state a baseline small business minimum quantitative requirement (MQR)* (not a “goal”) for small business (and socioeconomic categories as well if appropriate) based on market researchState if small business participation is based on total contract dollars/value (TCV). Explain how offers will be ratedPast performance of the offerors in complying with requirements of the clauses at FAR 52.219-8, Utilization of Small Business Concerns, and 52.219-9 Small Business Subcontracting Plan (evaluation may be under the small business participation factor/subfactor or under the past performance factor)Determine the realism of the proposed utilization of small businessesIncorporate small business requirements/commitments into resulting contract(s)Require all offerors to submit periodic reports (monthly, quarterly, any frequency deemed appropriate) on their small business utilization for the contract.DFARS 215.304 (c)(i)(B) states that proposals addressing the extent of small business performance shall be separate from subcontracting plans submitted pursuant to the clause at FAR 52.219-9 and shall be structured to allow for consideration of offers from small businesses. To facilitate this, the contracting officer should require all offerors to submit a “Small Business Participation Commitment Document (SBPCD)” separate and apart from the Subcontracting Plan. Points to ponder – Calling the separate document that addresses the extent of small business performance (participation) something other than a “Small Business Participation Plan” or any other type of plan, e.g. “Small Business Participation Commitment Document (SBPCD)”, helps not to confuse it with the Subcontracting Plan. In general, to mitigate the confusion, as a best practice, terminology associated with evaluating small business participation that is totally different from terminology associated with subcontracting plans has been established, starting with the phrase “Small Business Participation Commitment Document” (SBPCD). DFARS 215.304(c)(i) states…The contracting officer shall evaluate the extent to which offerors identify and commit to small business performance of the contract… So using the phrase Small Business Participation Commitment Document accomplishes two things: 1) creates a distinction from the subcontracting plan, & 2) establishes a tone for something greater than an offerors “best effort” (plan) but a commitment to do what they said they would do.Also, the intent here is to take small business utilization to a level beyond intent (plan) to a more enforceable commitment. The SBPCD is a document in which the offeror delineates all of its intentions and commitments to be in compliance with the factor/subfactor to be evaluated for small business participation. *Minimum Quantitative Requirement (MQR) is another phrase established to create separation and distinction from that associated with subcontracting plans. Simply stated, a minimum quantitative requirement is a minimum numerical (quantitative) level at which the government believes (based on market research) industry should be able to provide small business participation (opportunities) at the subcontract level (this has been referred to as a goal in participation plans). As a best practice, use MQR when talking about evaluating small business participation vice the word “goal” which is associated with subcontracting plans.Though a Small Business Participation Commitment Document is NOT the same as a Subcontracting Plan, the offerors SBPCD should complement the offerors subcontracting plan if they are required to submit a plan. For example, planned small business subcontracting dollars of the subcontracting plan should be equal to or greater than the extent of utilization quantitatively in the SBPCD. Note however that the subcontracting percentages may be different if the SBPCD proposal is based on the total dollars/value of the acquisition; the type(s) of effort to be subcontracted as stated in the subcontracting plan should be the same as that stated in the type described in the small business participation commitment document. It is important that the provisions of the subcontracting plan that coincide with the contents of the small business participation commitment document are consistent.Consideration of incorporating proposed small business participation commitments into contractually binding requirements.Small Business Participation Commitments to Contractually Binding RequirementsThe offerors small business participation commitments (to include a small business performance reporting requirement) should be incorporated into the contract as will be the subcontracting plan. Those commitments which become requirements may:List by name if appropriate the subcontractors to be utilized and the products/services they are to provideDescribe the type and complexity of supplies/services to be provided by small businessesState quantitatively the extent small businesses will be utilized in terms of the total value of the acquisition **provide support explanations or documentation**Provide evidence of their level of commitment, e.g. letters of intent, actual teaming agreements**Provide evidence of their past performance in small business utilization, e.g. eSRS reports /or if still appropriate SF 294s and 295s, Past Performance Information Retrieval System (PPIRS) reports**Though this may be required to be submitted to be in compliance with (responsive to) the solicitation, these (and other documents requested for verification /validation purposes) should not be incorporated into the contract.Small business participation commitments/requirements can be incorporated into the contract in at least one of three ways: 1) incorporate the SBPCD as an attachment, 2) capture the required small business participation commitments (requirements) in the Performance Work Statement/Statement of Work and Quality Assurance Surveillance Plan, or 3) in a Special Contract Requirements (Section H) clause. Consideration to monitor contractor small business performance post award.ReportingSubcontracting Reporting RequirementElectronic Subcontracting Reporting System (eSRS)FAR 19.704 (a)(10) requires contractors to assure they will submit Individual Subcontract Reports (ISRs) and Summary Subcontract Reports (SSRs) into the Electronic Subcontracting Reporting System (eSRS) for its subcontracting plans.Other than eSRS ReportingThough there is no regulatory reporting requirement to monitor a contractor’s performance in complying with its evaluated small business participation, to ensure enforceability of the small business participation commitments, periodic (monthly, quarterly any frequency deemed appropriate) reporting of performance by the contractor should be required, and there should be monitoring of contractor performance by the government.To facilitate monitoring of performance, reporting requirements should be established. This can happen at least one of 3 ways:Incorporate a reporting requirement into the Small Business Participation Commitment Document (if the SBPCD will be incorporated as an attachment)Include as part of a Special Contract Requirement clause (Section H)Use a Contract Data Requirements List (CDRL) (Section J Exhibit)A point to ponder - As a means to monitor small business participation in particular and subcontracting overall, it is a good idea to require from the contractor periodic reporting of their efforts and achievements. Doing so 1) strengthens the government’s ability to ensure opportunities for small businesses as stated in the SBPCD are provided by the contractor, 2) documents good faith efforts consistent with making liquidated damages assessment determinations when necessary, and 3) supports accomplishing contractor subcontracting performance assessment reporting in the Contractor Performance Assessment Reporting Systems (CPARS). Additionally, requiring other than eSRS reporting gives the government opportunity to obtain information not required to be provided in eSRS and obtain information on small business utilization from all contractors; small businesses as well as other than small businesses. Consider using subcontracting incentives. Subcontracting IncentivesIn assessing the use of subcontracting, FAR 19.705-1 permits the contracting officer to encourage increased subcontracting opportunities in negotiated acquisitions by providing monetary incentives. Various approaches may be used in the development of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, and women-owned small business concerns’ subcontracting incentives. They can take many forms, from a fully quantified schedule of payments based on actual subcontract achievement to an award-fee approach employing subjective evaluation criteria. However, the incentive should not reward the contractor for results other than those that are attributable to the contractor’s efforts. Subcontracting incentives guidance is found at FAR 19.708(c) Incentive Subcontracting Program (and see FAR 52.219-10).Determine small business past performance elements for evaluationPast PerformanceEvaluation of Small Business Past Performance RequirementIAW FAR 15.304, past performance shall be evaluated in all source selections for negotiated competitive acquisitions expected to exceed the simplified acquisition threshold. However, for DoD acquisitions, past performance evaluation is required for acquisitions meeting the thresholds established in accordance with Director of Defense Procurement and Policy Class Deviation Past Performance Evaluation Thresholds and Reporting 2013-O0018 dated September 24, 2013.DFARS 215.305(a)(2) requires that in DoD solicitations that include the clauses at FAR 52.219-8 Utilization of Small Business Concerns and FAR 52.219-9 Small Business Subcontracting Plan, the past performance of offerors in complying with the requirements of those clauses shall be evaluated. Note: Evaluation of small business past performance is not limited to evaluation of performance of other-than-small businesses only, but it includes the evaluation of small businesses’ past performance of utilizing fellow small businesses in contracts they were awarded as well.Examples of elements of small business utilization past performance (compliance with FAR 52.219-8) to evaluate includes:Actual prior use of small businessesUse of small businesses in the socioeconomic categoriesTypes of work performed by small businessesComplexity of the work performed by small businessesReporting of small business performance in CPARSHistory of prompt payments to small businessesAdditionally, when a subcontracting plan was required, evaluation of small business past performance (compliance with FAR 52.219-9) should include an evaluation of:Performance against subcontracting plan pliance with the subcontracting plan in general.Timely eSRS reporting (FAR 52.219-9 1 (l) & (2)Reduced or untimely payments (as defined in 19.701), made to small business subcontractors, determined by the contracting officer to be unjustified. (FAR 42.1502 (g). ................
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