NCMA World Congress 2006

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(No Transcript)
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Understanding Small Business Subcontracting
Compliance
Breakout Session 1706 Patricia Downing, Senior
Manager, Aronson Company Tuesday, April 11,
2006 245 pm 345 pm
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Overview of Small Business Subcontracting

• FAR Part 19 and the Small Business Act, as
  amended contain regulations that require large
  business compliance
• Federal Government procurements that exceed
  500,000 (1,000,000 for construction) require a
  small business subcontracting plan from large
  businesses

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Department of Commerce

• Established and maintains the North American
  Industrial Classification System (NAICS)
• SBA sets size standards for each NAICS
  (pronounced NAKES) industry
• Each industry size standard is based on either
  annual revenues or number of employees

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Small Business Categories

• Small (SB)
• Small Disadvantaged (SDB)
• Woman Owned (WOSB)
• Veteran Owned (VOSB)
• Service Disabled Veteran Owned (SDVOSB)
• HUBZone (HZB)

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Small Business Categories Defined

• Small Business (SB)
• A business concern, including its affiliates,
  that is independently owned and operated, and is
  not dominant in the field of operation in which
  it is bidding on government contracts.

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Small Business Categories Defined

• Small Disadvantaged (SDB)
• A business of which at least 51 is owned
  by Small, Socially and Economically disadvantaged
  group members and whose management and daily
  business operations are controlled by one or more
  such individuals. Must be certified by SBA.

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Small Business Categories Defined

• Woman Owned (WOSB)
• A business that is at least 51 owned and
  controlled by one or more women, and the
  management and daily operations of the business
  are controlled by one or more women.

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Small Business Categories Defined

• Veteran Owned (VOSB)
• A business that is at least 51 owned and
  controlled by one or more veterans, and the
  management and daily operations of the business
  are controlled by one or more veterans.

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Small Business Categories Defined

• Service Disabled Veteran Owned (SDVOSB)
• A small business concern where not less than
  51 is owned and controlled by service-disabled
  veterans and the management and daily business
  operations of which are controlled by one or more
  service-disabled veterans or, in the case of a
  veteran with permanent and severe disability, the
  spouse or permanent caregiver of such veteran.

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Small Business Categories Defined

• HUBZone (HZB)
• A business located in a Historically Under
  Utilized Business Zone that has been certified in
  writing by the SBA that it is a HUBZone small
  business concern, and that its principal office
  is located in a HUBZone and not fewer than 35
  percent of its employees reside in a HUBZone.

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• Considerations When Preparing Plans for Inclusion
  in Proposals

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Determining If Plan Is Required

• Check total contract value
• Check NAICS code assigned to RFP
• Check SBA size status thresholds for assigned
  NAICS code

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Plan Timeline

• Proposal Stage Write the Plan
• Award Stage
• Track
• Report
• Demonstrate Good Faith Efforts
• Closeout Stage Submit Final Reports

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Minimum Plan Requirements

• The Plan must demonstrate the contractors
  commitment to utilize small businesses of all
  types
• Small
• Small Disadvantaged
• Small Woman-owned
• Small Veteran-owned
• Service Disabled Veteran-owned
• HUBZone

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Minimum Plan Requirements

• Must demonstrate
• The contractors willingness to provide
  opportunities for the specific small businesses
  targeted in the plan
• Detail the contractors interpretation of good
  faith efforts

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Writing the Plan

• Use Plan Model varies by agency
• Generally includes the following
• Type of plan
• Commercial, Individual or Master
• Plan Period
• Base, Option or Life of Contract
• Goals
• Dollars and Percentages of Total Subcontracted
  Value

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Writing the Plan

• Primary NAICS codes
• Identified in the RFP for Prime Contractor
• Prime Contractor identifies the NAICS codes for
  each subcontracting entity in the Plan Matrix

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Writing the Plan

• Matrix
• Lists each subcontracting entity
• Shows each small business category and/or
  categories under which the entity is qualified
• May list services or products when specific
  subcontractor is unknown
• Indirect costs
• included or excluded from plan dollars

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Writing the Plan

• Identification of Program Administrator
• Duties of Program Administrator
• Reporting Requirements
• Record Keeping

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Writing the Plan

• Good Faith Efforts
• List activities to demonstrate efforts
• References Liquidated Damages Clause invoked when
  goals are not met and a good faith effort is not
  evident

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• Developing Goals

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FY 2005 Average Government-wide Goals Applicable
to Federal Buyers

• SB 23
• SDB 5
• WOSB 5
• HZB 3
• SDVOSB 3

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FY 2005 Average Government-wide Goals Applicable
to Large Prime Contractors

• SB 40
• SDB 7
• WOSB 6
• HZB 3
• SDVOSB 3

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FY 2005 Goals Applicable to DoD Large Prime
Contractors

• SB 42
• SDB 5
• WOSB 5
• HZB 3
• SDVOSB 3

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Identifying Opportunities

• Contract Administrators work with Project
  Managers to identify opportunities
• May include
• Consultants Independent Contractors
• Other Direct Costs (ODCs)
• Subcontractors

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Identifying Sources

• Bidders lists
• Corporate database
• Other internally developed mechanisms
• External source lists

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Using Historical Data

• Information tracked in corporate database
• Plans and semi-annual reports for similar
  projects
• Past Performance reports

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What to Do When No Opportunities Exist

• Include indirect costs
• Consider subcontracting a portion of the work
  your firm would normally perform
• Look for opportunities in purchasing ODCs

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Incorporating a Master Plan

• Still Requires Individual Plan
• Follow Policies established in Master Plan
• Complete Attachment A and include Master Plan

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Other Considerations

• Plan submitted with proposal
• Plan may be an evaluation factor
• Plan must be approved prior to award
• Plan is open to negotiation prior to award
• Contract will not be awarded if plan is
  unacceptable

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Award Stage Tracking and Reporting

• Understand what is to be reported
• Know how it is to be reported
• Determine how to track
• Dependent upon tracking mechanisms available
• Electronic
• manual

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Award Stage
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Award Stage What to Report

• Semi-annually report on achievement of individual
  plan goals to include
• Dollars expended during the specified 6 month
  period
• Cumulative dollars expended over the life of the
  contract including the current reporting period
• Percentages of total dollars for each category

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Award Stage What to Report

• Annually report on overall goal achievement
• A cumulative report of all subcontracted dollars
• One report per agency
• Agency is highest level of agency for example
• NIH, CDC, NCI should all roll up into one report
  for DHHS

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Award Stage How to Report - eSRS

• As of November 1, 2005, eSRS is the new
  government-wide reporting mechanism for CIVILIAN
  agencies
• DoD reports are scheduled to switch to eSRS mid
  2006
• What is eSRS?
• Electronic Subcontracting Reporting System

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Award Stage How to Report

• Report electronically-online
• Website http//esrs.gov
• All CIVILIAN reports must be completed online at
  this website
• Paper reports will no longer be accepted

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eSRS - Whats Different?

• Requires registration of contractor
• Some CCR info linked to eSRS
• Requires individual input of each contract
  requiring a plan
• SF294 now called ISR
• SF295 now called SSR

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eSRS - Whats Different?

• ISR-Individual Subcontracting Report (old SF294)
• New info needed for reporting
• DUNS as it appears on individual contract award
• Product and Service Codes
• NAICS

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eSRS - Whats Different?

• Lower Tier Subcontractors use eSRS
• Info needed
• Prime contract number
• Subcontract number
• DUNS of prime contractor
• Product and service codes
• NAICS

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eSRS - Whats Different?

• SSR Summary Subcontracting Report (old SF295)
• New info needed for reporting
• DUNS number as it appears on individual contract
  award
• Product and Service Codes
• Make sure copy signed by CEO is on file

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Additional eSRS Info

• Contractor Guide available
• Due dates are still the same
• Due 30 days after the end of the reporting period
• ISR April 30 and October 30
• SSR October 30 for CIVILIAN agencies

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Award Stage Reporting

• OF 312 - Optional Form 312
• If listed as a contract requirement..
• It is NOT optional!
• Due upon Contract completion
• Reports Goal Achievements by NAICS over life of
  contract
• Closeout
• Final reports should be submitted for the ISR,
  SSR and OF 312 (if required) as soon as the
  contract ends

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Award Stage Tracking

• In order to report you must track
• Tracking begins at the Proposal Stage by
  capturing size status information
• All proposed subcontractors shall self-certify
  their size status during the proposal stage
• All business that state they are either a HUBZone
  or SDB must be certified by SBA
• Self-certification is not acceptable for these
  two small business categories

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Award Stage Tracking

• Re-certification of each businesss size
  classification should be done as often as the
  contract or regulations require
• This can be as often as annually
• Business size certification can be as complicated
  as officially signed Representations and
  Certifications or as simple as a signed statement
  on company letterhead

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Award Stage Tracking

• The mechanism chosen for businesses to self
  certify should contain the following
• Small business types that must be reported
• Penalty clause for providing false information
• Point of contact
• Signature of party providing information

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Award Stage Tracking

• Certification documents should be updated at
  regular intervals
• Certification documents should be retained in a
  central location in either hard copy form or
  electronically
• Documents should be readily available for audit
  by SBA and/or other agencies

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Award Stage Tracking

• Documents will be checked by SBA for
• Consistency of data collection
• Data reporting across all vendors
• The information collected by these documents
  should be entered either into a database or the
  accounting system for ease of reporting

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Award Stage Tracking/Reporting Tips

• Any vendor used on a contract can be reported on
  the ISR and SSR whether or not they were included
  in the original plan
• Each vendor/subcontractors dollars may be
  reported multiple times
• If a business qualifies as a SDB WOSB their
  dollars will be reported under each category

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Good Faith Efforts
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Good Faith Efforts

• Protect yourself and your company

DOCUMENT! DOCUMENT! DOCUMENT!
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Good Faith Efforts

• Paper your files with documentation on the
  following
• Basis of subcontract awards
• Competitive bids, sole source, etc.
• Justifications for sole source awards
• Justifications for not awarding to small
  businesses
• Resources used to locate a business
• Reasons for not using a small business that
  appears to meet the requirements

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Good Faith Efforts

• Other necessary documentation includes
• Completing the Remarks section of the ISR each
  reporting period with notes on progress or lack
  of progress in meeting goals - important when
  faced with failure to meet the established goals.
  
• Any contact with the various resources available,
  i.e. CMR, SBA, OSDBU, etc.

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Good Faith Efforts

• Why is it important to demonstrate Good Faith
  Efforts?
• To avoid costly liquidated damages
• To avoid negative past performance reports

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Good Faith Efforts

• Failure to meet goals and failure to demonstrate
  Good Faith Efforts will result in the
  application of the Liquidated Damages clause.
• The amount of damages attributable to the
  contractors failure to comply shall be an amount
  equal to the actual dollar amount by which the
  contractor failed to achieve each subcontracting
  goal. FAR 19.705-7(b)

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• Monitoring for Compliance

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Keys to Compliance

• Establish written policies and procedures for
• Procurement
• Training of purchasing personnel
• Documentation
• Tracking
• Reporting

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Keys to Compliance

• Train your staff!
• Educate them on
• Written company policies and procedures
• Applicable FAR regulations
• NAICS codes
• SBA Size Status criteria
• How to write a plan

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• Best Practices

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Policies

• Establish written policies and procedures for
• Procurement
• Training of purchasing personnel
• Documentation
• Tracking and reporting of Goal Achievement

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Maintain Historical Data

• Database to include
• Current and past vendors
• Detail products and services provided
• NAICS codes and associated size status
• Past performance
• Capability statements

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Maintain Lists Databases

• Bidders Lists
• Internal Databases
• External Databases
• CCRs Dynamic Small Business Search
• NIHs e-PIC (e-Portals In Commerce)

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Database of Potential New Subcontractors

• Database to include
• New vendors
• Contact Information
• NAICS codes and associated size status
• Capability statements
• References

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Database of Past Performance

• Database to include
• General contract information
• Goals established
• Goals achieved
• Problems encountered and solutions

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Maintaining Vendor Size Status Information
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Subcontractor Size Certification

• Re-certification of each businesss size
  classification should be done as often as the
  contract or regulations require
• This can be as often as annually
• Business size certification can be as complicated
  as an officially signed Representations and
  Certifications document or as simple as a signed
  statement on company letterhead

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Subcontractor Self Certification

• The mechanism chosen for businesses to self
  certify should contain the following
• Small business types that must be reported
• Penalty clause for providing false information
• Point of contact
• Signature of party providing information

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Subcontractor Self Certification

• Certification documents should be updated at
  regular intervals
• Certification documents should be retained in a
  central location in either hard copy form or
  electronically
• Documents should be readily available for audit
  by SBA and/or other agencies

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Subcontractor Data

• Documents will be checked by SBA for
• Consistency of data collection
• Data reporting across all vendors
• The information collected by these documents
  should be entered either into a database or the
  accounting system for ease of reporting

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Good Ideas

• Become active in Business Organizations such as
• Your local Chamber of Commerce
• Professional Groups that share your businesses
  interests and goals
• Local small business outreach centers

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Good Ideas

• Contact the SBA
• Contact the OSDBU at each agency where you have a
  working relationship
• Offer to help small business become
  subcontractors with your company or others
• Participate in Mentor-Protégé programs
• Establish Joint Ventures

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A

• Follow these guidelines and your organization
  can make the grade in Small Business
  Subcontracting Compliance!

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Resources

• SBA website http//www.sba.gov
• AcqNet http//www.arnet.gov
• CCR http//www.ccr.gov
• eSRS http//esrs.gov
• Patricia Downing
• Aronson Company(301) 222-8227