TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT:Regulatory Guidance on Section 211 of Public Law 95-507
procurement policy should be uniform and consistent in application.
The purpose of this supplementary Policy Letter is to provide a uniform
resolution to certain problems and questions which have arisen in the
administration of OFPP Policy Letter 80-2, April 29, 1980 (45 Federal
Register 31028, May 9, 1980).
The question has been raised whether it is necessary to obtain a new
subcontract plan if a modification over $500,000 ($1 million for construction)
is made to a contract already containing a plan. Policy Letter 80-2 indicates
that subcontracting plans must be included, pursuant to Public Law 95-507, in
contracts and contract modifications over the statutory thresholds.
It also requires that the "contracting officer promptly negotiate appropriate
revisions to "agreed subcontracting percentage and dollar goals if any
subsequent amendments to the contract will have a major impact on the original
planned volume or type of contracting effort."
It is not necessary for the contracting officer to obtain a new subcontract
plan if a modification over $500,000 ($1 million for construction) is made
to a contract already containing a plan. The modification may incorporate the
existing plan by reference. However, the modification must either contain separate
goals for the new effort or revise the original goals.
Another question has
been raised as to whether the terms of an overall or
"master" company subcontracting plan may be incorporated by reference into
a specific plan submitted for a given contract over the statutory thresholds.
This is acceptable provided: (1) the master plan contains all the elements
required by the statute; (2) subcontract goals for small and small disadvantaged
firms are specifically set forth in each contract or modification over the
statutory thresholds; (3) any changes to the plan deemed necessary and required
by the contracting officer in areas other than goals are specifically set forth
in the contract or modification; (4) the contracting officer has copies of
the entire plan; and (5) the resident Procurement Center Representative (PCR)
of the Small Business Administration has had an opportunity to comment on the
A third question relates to the applicability of an approved commercial
products plan beyond the fiscal year in which it is approved. Policy Letter
80-2 states that:
a commercial product is offered the required subcontracting plan may
relate to the company's production generally (both for commercial and
non-commercial products) rather than solely to the item being procured
under the government contract. In such cases, the contractor shall be
required to submit one company-wide annual plan to be reviewed for approval
by the first agency with which it enters into a prime contract (which
requires a subcontracting plan) during the fiscal year, or by another
agency satisfactory to the contracting officer."
The approved plan shall
apply to all deliveries made under contracts entered into during the
contractor's fiscal year, even though those deliveries are made in a
succeeding fiscal year. The contractor shall submit a new plan to the first
agency with which it enters into a contract (over the statutory threshold)
during a succeeding fiscal year. The new plan shall apply to all deliveries
made under contracts entered into during the succeeding fiscal year, no matter
when those deliveries are made.
Also with respect to
commercial products plans, there is a question whether the contractor is
required to keep "contract-by-contract" records
pursuant to paragraphs 3f(3) and (6) of the Small Business and Small
Disadvantaged Business Subcontracting Plan (Negotiated) and (Advertised)
clauses. Such contract-by-contract records would be incompatible with the
concept and purpose of an annual company-wide plan, and are not required.
Accordingly, OFPP Policy Letter 80-2 is amended by adding the following
sentence at the end of paragraphs 3f(3) and 3(f)(6) of both the Negotiated
and Advertised clauses: "This requirement does not apply to a plan submitted
pursuant to par. 6, hereof."
Paragraph 3d of the
clause entitled "Small Business and Small
Disadvantaged Business Subcontracting Plan (Negotiated)", as set forth in
Policy Letter 80-2, provides for flowdown of the subcontracting plan
requirements to all non-small business subcontractors which receive
subcontracts over the applicable thresholds. Further, the prime contractor is
required to describe its "procedures for the review, approval, and monitoring
for compliance with such plans."
requirement has raised questions of what is meant by monitoring and whether,
in some cases, the prime contractor should be relieved of this responsibility.
If interpreted literally to require each prime contractor to monitor its
subcontractors' compliance, by plant visits and examinations of records,
this could result in situations such as: (1) several contractors monitoring
the same subcontractor, to review essentially the same information, which
would at a minimum be disruptive and redundant; (2) the prime contractor
being monitored by one or more of the subcontractors which it is monitoring,
where the prime/sub relationships are reversed; and (3) problems concerning
access to records, particularly when the prime contractor and the subcontractor
are competitors. This disruption, duplication and additional unnecessary
cost do not appear to be justified or necessary. In many instances, particularly
where a subcontractor is also performing Government prime contracts, the
Government already has a representative either on the scene or available
who is monitoring the firm's performance as a prime contractor. The Government
representative, in such case, should be familiar with the firm's overall
plan for subcontracting with small and small disadvantaged businesses,
and therefore in the best position to determine whether the firm is meeting
its goals either as a prime contractor or as a subcontractor. Accordingly,
departments and agencies may, in their regulations, notwithstanding the
last sentence of the aforesaid paragraph 3d, relieve the prime contractor
from this obligation when they deem it appropriate. An agency's decision
to relieve a contractor from its obligation to monitor for compliance should
take into consideration an existing Government presence at the subcontractor's
plant and whether the monitoring can be accomplished most economically
and efficiently through Government or prime contractor activity.
monitoring is done by the prime contractor or by the Government, the degree
of monitoring will vary depending on the circumstances. Such factors as
access to records, subcontract dollar amount, the subcontractor's past
performance in meeting goals, and many others must be considered in reviewing
the procedures for monitoring compliance.
While there is some flexibility,
as indicated by the foregoing discussion, with respect to monitoring for
compliance, prime contractors are not relieved of their obligation to review and approve
their subcontractor's plans.
supplementary Policy Letter is effective June 30, 1981.
CONCURRENCE: This supplementary Policy Letter has been concurred in by the Director
of the Office of Management and Budget.