Subcontracting Plans. Diane G. Dempsey BAE Systems Intelligence & Security Sector Director, Socio-Economic Business Programs

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1 Subcontracting Plans Diane G. Dempsey BAE Systems Intelligence & Security Sector Director, Socio-Economic Business Programs

2 Subcontracting Plans - Purpose To provide your customer with your intent to subcontract to small business. The subcontracting plan is a document that is typically incorporated into your contract with your customer. Statutory requirements: required in support of federal/state/local government contracts Corporate policy internal goals set by the corporation

3 Commercial-Industry Subcontracting Plan Content Corporate policy internal goals set by the corporation consumer facing organizations Typically includes the corporate policy relating to small business utilization. Is not as complex as those required by governments local/state/federal Includes a goal, does not always include the anticipated dollars to be awarded. Majority of industry Subk Plans focus on MBE/WBEs Internal audits may be conducted good business practice

4 U.S. Government Regulations Federal Acquisition Regulations Subpart 19.7 The Small Business Subcontracting Program states that any contract exceeding $650, issued to a large business (small businesses are exempt) requires a subcontracting plan. A Subcontracting Plan must include elements as defined following; however, customers may add requirements to this list. FAR Clauses is a companion to FAR Subpart 19.7, providing definition to this requirement.

5 Federal Subcontracting Plans Four types of Subcontracting Plans: 1. Individual Subcontracting Plan [FAR (a)] 2. Master Subcontracting Plan [FAR (b)] 3. Commercial Subcontracting Plan [FAR (d)] 4. Comprehensive Subcontracting Plan [DFARS (1)]

6 Federal Subk Plan Content Statutory requirements: required in support of federal/state/local government contracts For federal contracts: Must be IAW FAR Breaks our the goals and dollars that will achieved in the base and option years of the contract Requires semi-annual (ISRs)and annual reporting (SSRs) Audits are conducted to ensure compliance annual/bi-annual (2 yrs) or tri-annual (3 yrs) Outreach is required.

7 Individual Subcontracting Plan Subcontracting Plan that covers the entire contract period, including option periods, applies to a specific contract, and includes the goals that are based on Offeror s projections for subcontracting. Regulations concerning the Individual Subcontracting Plan are detailed in the FAR (a). The Individual Subcontracting Plan may also include indirect costs in establishing subcontracting goals. In such case, the Plan must include a statement showing how the proportional share of these costs is allocated to the SB, VOSB, SDVOSB, HUBZone SB, SDB and WOSB (FAR (a)(6).

8 Elements - Goals Goals - Total dollars planned to be subcontracted to each group. Goals should be stated in both dollars ($) and percentages (%). The contractor must state the total subcontracting dollars, and then state separately the total dollars that will be subcontracted to SB, SDB, WOSB, HUBZone SB, VOSB, HBCU and SD/VOSB. The SB dollar amount must include all the small business subset amounts. **The percentages must be expressed as percentages of the total contract dollars OR total subcontracting dollars. In the case of total contract amount, both should be reflected. Goals for option years must be broken out separately. **Defined in the RFP

9 Elements Products & Services A description of the types of supplies and services to be subcontracted to each group, including the supplies and services to be subcontracted to OTSB (LB) subcontractors. Customers may require the names of the suppliers. Illustrative sample:

10 Elements cont. A description of the method used to develop each of the goals. A description of the method used to identify potential sources. A statement as to whether or not indirect costs were included in the subcontracting goals. Some solicitations will require that goals are expressed as a percentage of the total contract value rather than as a percentage of total subcontract value. In this instance, SBA prefers that the plan expresses goals both as a percentage of contract value and as a percentage of total subcontracting.

11 Elements cont. Element 2 cont. The Plan Administrator The name of the Administrator of the Subcontracting Plan and a description of his/her duties. Element 3 - Efforts to Ensure Equitable Opportunities A description of the efforts the company will make to ensure that SB, SDB, WOSB, VOSB, SD/VOSB, and HUBZone SB concerns will have an equitable opportunity to compete for subcontracts. Element 4 Flow-Down Requirements Assurances that the large business will flow-down the subcontracting requirements to its large business subcontractors unless the plan is a Commercial Subcontracting Plan.

12 Elements cont. Element 5 - Assurances to Cooperate in Studies and Submit Reports Assurances that the company will cooperate in any studies or surveys as may be required, and submit periodic reports in order to allow the government to determine the extent of compliance by the company with the Subcontracting Plan. Assurances that its subcontractors agree to submit required reports. Element 6 - Internal Recordkeeping A recitation of the types of records the company will maintain to demonstrate its compliance with the Subcontracting Plan. (See Appendix D, Sample Documentation Form for Purchases/Subcontracts Over $150,000.)

13 Liquidated Damages If the prime contractor does not meet it s goals it can be subject to liquidated damages. LD is difficult to assess if the prime contractor has demonstrated good faith efforts to meet it s goals: Participates in SB outreach events Solicits SBs for subcontracting purposes Conducts market research to identify qualified SBs for subcontracting opportunities.

14 Master Subcontracting Plan A Master Plan is a general Subcontracting Plan that does not refer to a specific project or contract. It describes the contractor s (nonspecific) Small Business Subcontracting Plans and includes all the elements of the Individual Subcontracting Plan EXCEPT goals. The contracting organization may establish a Master Plan that, once approved by the Administrative Contracting Officer (ACO), will be effective for three years. The Master Plan is addressed in the FAR (b), which continues and states: However, it is incumbent upon contractors to maintain and update master plans. Changes required to update master plans are not effective until approved by the contracting officer. Once approved by the Contracting Officer, a Master Plan can be incorporated into an Individual Plan.

15 Commercial Subcontracting Plan A Commercial Plan is a Subcontracting Plan that covers the Offeror s fiscal year and applies to the organization s entire production of commercial items sold. Unlike the Master Plan, Commercial plan does include goals, and is the preferred type of Subcontracting Plan for contractors furnishing commercial items. The Commercial Plan is not contract-specific; rather, it is effective for all government contracts for the duration of the organization s fiscal year. The plan is negotiated with the Contracting Officer of the first agency with which the organization has an Individual Plan or with the first Prime Contractor with which the organization contracts. Thirty (30) working days before the end of the fiscal year, the organization should submit a new Commercial Plan to the Contracting Officer responsible for the ongoing contract, with the latest completion date. The Commercial Plan is not reviewed or accepted by the Defense Contract Management Agency (DCMA). It is reviewed, negotiated and approved by the Contracting Officer responsible for the current contract. The plan is addressed in the FAR (d). Commercial Products are defined as those products that are in regular production, and are sold competitively in substantial quantities to the general public and/or to industry. Commercial products are usually sold at established catalog or market prices. When preparing the Subcontracting Plan, one should be able to identify commercial products.

16 Comprehensive Subcontracting Plan Comprehensive Subcontracting Plan Test Program is not accepting additional participants Participant requirements: Performed three (3) DoD contracts (supplies and services) totaling at least $5 million, and Has met or exceeded an SDB subcontracting goal of 5%. Congress extended the CSP for 3 years in 2013.

17 Establishing Subcontracting Goals Commercial companies can establish goals based on procurement history, market research and benchmarking with their industry. Government goals are established by statute and vary at the federal, state and local levels. The federal government has varying goals. SBA sets government wide goals Civilian agencies establish their individual goals DOD sets forth a goal every year and the departments within DOD set their individual goals

18 Federal Small Business Goals SB - Small Business 23% Goal. Must meet FAR Size Standards. SDB - Small Disadvantaged Business 5% Goal. Includes Alaskian Native Corp. (ANCs), Native Owned (Native American Indian, Alaskian & Hawaiian)and HBCU/Mis**** Owned & Controlled by socially and economically disadvantaged individuals. 8(a)Certified Small Business SDB (WOSB can be SDB) with additional certification through SBA. Eligible for set aside contracts 8(a) firms are SDB; SDB s are not necessarily 8(a).

19 Fed SB Goals cont. WOSB - Woman-Owned Small Business 5% Goal Self Certification: 51% woman/woman ownership & controlled. HUBZone - Historically Underutilized Business Zone Small Business Concern - 3% goal. Principal place of business must be located in and 35% of employees must line in a HUBZone designated area. Must be SBA certified. Veteran-Owned Firm - SB owned & controlled by veteran 3% goal for veteran-owned small business. SB 51% owned and controlled by veteran(s).

20 Fed. SB Goals cont. Service Disabled Veteran-Owned firms SB 51% owned and controlled by service disabled veteran(s). 3% goal. GOALS MAY BE HIGHER BASED ON CUSTOMER REQUIREMENTS. ***Companies qualify as small business under the NAICS Code that is designated for the work being performed.

21 Dept. of Defense SB Goals DOD changes its subcontracting goals every year Subcontracting Goals: Small Business: 36.0% Small Disadvantaged: 5.0% Woman-Owned: 5.0% HUBZone: 3.0% Veteran-Owned no statutory goal Service Disabled Veteran-Owned: 3.0%

22 Calculating Goals We are subcontracting to one LB and one SDB/WOSB/Hubz. Goals will be calculated as follows: Dollars Percentages Small Business $ % Large Business $ % Total Subcontracting $ % SDB $ % WOSB $ % HUBZone $ % VOSB $ 0 0%*** SDVOSB $ 0 0% **Can be reported for civilian contracts. Companies should set reasonable and achievable subk goals. They can achieve the goals set by governments; however, companies are encouraged to set goals they can meet - DO NOT OVERPROPOSE. Is this compliant?

23 Calculating goals cont. We are subcontracting $1.00 to Four SBs: 1 - SDB/WOSB/SDVOSB, 1 - WOSB/VOSB, 1 - HUBZone & 1 -SDVOSB/HUBZone. Goals will be calculated as follows: Small Business $ % Large Business $0.00 0% Total Subcontracting $ % SDB $ % WOSB $ % HUBZone $ % VOSB $3.00** 75% SDVOSB $ %

24 Calculating Goals, cont. We are subcontracting $1.00 to One LB. We are also subcontracting $1.00 to three SBs to the US Army: One WOSB/Native American SB, one Service Disabled Veteran-Owned SB & One WOSB. Goals will be calculated as follows: Small Business $ % Large Business $ % Total Subcontracting $ % SDB $ % WOSB $ % HUBZone $0 0% SDVOSB $ % **. DOD does not recognize VOSB, only SDVOSB. Is this a compliant plan?

25 Commercial/Industry Subcontracting Plans Introduction that provides a profile of the company and it s policy related to diverse supplier utilization. Goals Typically established for: Women Business Enterprises Minority Business Enterprises Veteran Owned Business Enterprises. Not always small businesses can be large.

26 Industry Goals Goals can be established by corporate policy and IAW industry trends: Industry Goals ( can vary): MBE 15% WBE 15% VBE 5%

27 Calculating Goals A percentage of the total dollars planned to be procured is the basis for calculating industry goals: $1M planned total procurement budget 15% - MBE $150, % - WBE $150, % - VBE $ 50, If three diverse suppliers are used (1-MBE/1- WBE/1-VBE) the total diverse spend is $350K. If one diverse supplier (MBE/WBE/VBE) is used, the diverse spend is $150K.

28 Final Steps Proof the entire document and calculations before signing and submitting. Customers may require their signature to be fully executed. Once accepted, changes cannot be made without the customers approval. Upon award, align with the customer reporting requirements. Brief Program Manager on goals and the associated responsibility for achievement.

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