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HHS Small Business Program Policy Manual

Chatper 7: Subcontracting

Topics in this Chapter:

  1. What is a Subcontract Plan?
  2. What is a Subcontract Goal?
  3. When is a Subcontract Plan Required?
  4. Subcontracting Review Process
  5. Subcontracting Plan Modifications
  6. Post Award Activities and Reports
  7. Monitoring, Documenting, and Evaluating Prime Contractor Performance

This part sets forth policy and procedure about HHS’ subcontracting process. It expands on key aspects of the Federal Acquisition Regulations (FAR), the Office of Management and Budget (OMB) policy, and the U.S. Health and Human Services Acquisition Regulations (HHSAR.

The HHS OSBP recommends the use of the HHS Subcontracting Plan template located at http://www.hhs.gov/asfr/ogapa/osbdu/small-business/subcontractplan.html to submit proposed Individual Subcontracting Plans, including modifications. This template is not intended to replace an existing Commercial Plan.

A. WHAT IS A SUBCONTRACT PLAN?

As defined by FAR Part 19.7, “Subcontract” means any agreement (other than one involving an employer-employee relationship) entered into by a Government prime contractor or subcontractor requesting supplies or services required for performance of the contract, contract modification, or subcontract.

A Subcontract Plan (hereafter referred to as Plan) is required for any contract that may exceed $550,000 or $1,000,000 for construction. Small business concerns are not required to submit a Plan. All large companies, hospitals, educational institutions, non-profit organizations, etc., (also referred to as other than small business concerns), are required to submit an acceptable Plan. Each Plan should provide “maximum practicable opportunity” for small businesses to participate in contract performance. A large prime offeror or contractor may submit one of the following Plans:

Individual Plan (IP) – contains elements developed for a specific contract. The goals and dollars should be based on the cumulative value of the base and all options. For Indefinite-Delivery Indefinite-Quantity (IDIQ) type contracts, HHS suggests that the offeror consider the 1) total estimated value of the requirement; or 2) the median of the Government’s minimum/maximum obligation values outlined in Section B of the Request for Proposal (RFP). The IP’s percentage goals will be applicable to each Task Order (TO) that is completed by a non-small business concern. An IP is applicable for the full term of the initial contract .If the contract is modified, the IP shall be modified.

Commercial Plan (CP) – contains elements developed for a commercial service or product (e.g., division, plant or product line). The CP goals are negotiated with an agency’s Contracting Officer (CO) on a division or company-wide basis. The CP is effective for the duration of the offeror or contractor’s fiscal year. The CP goals will be applicable to all government contracts issued under the negotiated CP for the duration of the contractor’s fiscal year.

Master Plan (MP) – contains the elements identified in FAR Subpart 19,704, excluding the goals and dollars. Often a large vendor develops a MP to serve as a template to incorporate into an IP. The goals should be commensurate with the proposed tasks under the requirement. If approved by a CO, the MP may be effective for a three-year period. The resulting Individual Subcontracting Plan may be applicable for the life of the contract.

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B. WHAT IS A SMALL BUSINESS GOAL?

Refer to SBPM Chapter 1, Subpart C.

C. WHEN IS A SUBCONTRACT PLAN REQUIRED?

According to FAR Subpart 19.702, 3 Code of Federal Regulations (CFR) Subpart 125.3 and the Office of Management and Budget (OMB) Policy Letter 80-2, a subcontract plan is required in contracts and contract modifications over the statutory thresholds. HHS requires a Plan for a contract that may exceed one of the statutory thresholds as described in FAR Subpart 19.702(a) (1) & (2).

In accordance with FAR Subpart 19-705-2(c), if it is determined that there are no subcontracting possibilities, the determination must be approved at a level above the CO and the documentation shall become a part of the official contract file.

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D. SUBCONTRACTING REVIEW PROCESS

Preparation-Step 1:    Commercial Market Representative Assistance

The Small Business Administration has Commercial Market Representatives (SBA CMR) assigned to its regions to counsel contractors on how to prepare a subcontracting plan. A CMR may assist a contractor in identifying small business concerns by means of the CCR, SBA DSBS, Business Matchmaking events, and other resources and tools (refer to SBPM Chapter 2, Subpart F) Another key aspect of the SBA CMR’s role is to maintain a portfolio of prime contractors for which they conduct Subcontracting Orientation and Assistance Reviews (SOARs). See 13 CFR 125.3(e) for additional information. Link to the SBA’s CMRs: http://www.sba.gov/content/commercial-market-representatives

Submission-Step 2:    Contracting Officer’s (CO) Review

Upon receipt of the offeror’s proposed Plan, the CO shall complete a HHS Subcontracting Review Form (http://www.hhs.gov/about/smallbusiness/ subplanreviewform_revised_101911.doc) and submit it with the following documentation for the SBS and SBA PCR review:

  • HHS Form 653 (Refer to SBPM Chapter 6, Subpart A);
  • Offeror or Prime Contractor signed Subcontracting Plan which includes the CO’s signature;
  • Offeror or Prime Contractor Summary of Proposed Costs; and
  • Any supporting documentation detailing the offeror or prime contractor’s efforts to find qualified small businesses, why the statutory subcontracting goals can not be obtained, etc.

Note: The CO is strongly encouraged to instruct offerors to use the HHS Subcontracting Plan template to expedite the review process.

After the competitive range is established, but prior to final negotiations, the CO should submit the offeror’s Plan to the SBS for review and to develop a subcontracting negotiation strategy. Finally, the CO shall ensure that the terms and conditions of the contract address the submission of subcontracting reports (refer to Subpart F of this Chapter).

Review-Step 3:    HHS Small Business Specialist (SBS)

Upon receipt and acceptance of the completed HHS Subcontracting Plan Review Form and supporting documentation, the SBS has five (5) business days to conduct a Departmental review.

Review-Step 4:    SBA Procurement Center Representative (SBA PCR)

In accordance with HHSAR Subpart 319.705-5(a) (3), the SBA PCR shall be allowed five (5) business days to review and respond to a proposed Plan.

If the SBA PCR and SBS concur, the SBS will return the HHS Subcontracting Review Form and the signed Plan. The CO must file the documentation in the official contract file.

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E. SUBCONTRACTING PLAN MODIFICATIONS

The Office of Management and Budget (OMB) Policy Letter 80-2 requires the "Contracting Officer to 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." This statement means that if the scope of the project and/or the total estimated cost of the contract increases (or decreases); a subcontracting plan modification must be submitted for review in accordance with Subpart D of this chapter. When submitting the revised Plan package, a copy of the previous approved Plan should also be included.

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F. POST AWARD ACTIVITIES and REPORTS

1. Contracting Official Reporting Requirements

In accordance with FAR Subpart 19.705-6, the Contracting Office shall submit a copy of the Plan to the appropriate SBA District Office (http://www.sba.gov/category/navigation-structure/starting-managing-business/managing-business/local-resources/).

2. Contractor’s Subcontracting Reporting Requirements

In accordance with FAR Subpart 19.704(a)(10)(iii), the Electronic Subcontracting Reporting System (eSRS) shall be used by the contractors and subcontractors to submit all subcontracting reports. For more information on the eSRS, log onto http://www.esrs.gov. The prime contractor is required to submit the following reports:

  • Individual Subcontracting Reports (ISR) for a specific contract is due every April 30th for the period of October 1stthrough March 31st and October 30th for the period April 1st through September 30th. ISRs are reviewed and accepted or rejected by the Contracting Official.
  • Summary Subcontracting Reports (SSR) for an Individual contract is due annually on the October 30th for the period of October 1st through September 30th. SSRs are reviewed and accepted by the HHS eSRS Agency Coordinator.
  • SSR for a Commercial product or product line is due at the end of the contractor’s fiscal year. SSRs submitted in response to a Commercial Subcontracting Plan are reviewed and accepted by the agency Contracting Official.

3. Additional Guidance on the Report Requirements for IDIQ Contracts:

All large businesses and “other than small business concerns” providing services under an Indefinite Delivery type contract with an established Plan are required to submit an ISR in accordance with FAR Part 19.7 and 52.219-9. ISRs must be submitted when due regardless of whether or not there has been any subcontracting activity. ISRs should be based on all services rendered under the Indefinite Delivery contract during the appropriate reporting period. For example, if company A provided services for Task Orders (TO) 10, 15, 25 and 30 under an Indefinite Delivery contract for the reporting period of October to March, its ISR will reflect those services provided during that period. If company B did not receive a TO under the same Indefinite Delivery contract for the same period, it must also submit an ISR showing no subcontracting activity.

Summary Subcontracting Reports (SSR) shall be submitted in accordance with the FAR and SBPM. Currently, the HHS Electronic Subcontracting Reporting System (eSRS) Agency Coordinator has the authority to acknowledge or reject all SSRs submitted in response to Individual Subcontracting Plans. The cognizant agency Contracting Officer has the authority to acknowledge or reject SSRs submitted by contractors with Commercial Subcontracting Plans.

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G. MONITORING, DOCUMENTING, and EVALUATING PRIME CONTRACTOR PERFORMANCE

Upon notification that the prime contractor has submitted its ISR, the CO shall evaluate the prime contractor’s performance and document the file (FAR Subpart 19.706).

You may visit the following website to determine your OPDIV’s eSRS Point of Contact to which you should submit your subcontracting reporting questions: http://www.hhs.gov/about/smallbusiness/esrscontacts.html.

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Content created by Assist. Sec./Financial Resources - Small/Disadvantaged Business
Content last reviewed on July 25, 2014