Small-business confusion

A client called me the other day with an interesting question. He was preparing a multiple-award schedule contract proposal and his contracting officer at the General Services Administration told him he would have to prepare a small-business subcontracting plan.

This didn't trouble him, but he also was told that his major subcontractors would have to prepare plans of their own. This troubled him. The last thing he wanted was to spend time renegotiating hundreds of information technology subcontracts. He asked me whether he truly had to "flow down" GSA's subcontracting plan requirement to his subcontractors.

OK, so maybe "interesting" is too strong a description, but the question is a good one. As every large multiple-award schedule contractor knows, GSA incorporates the Federal Acquisition Regulation (FAR) 52.219-9 clause into all multiple-award schedule contracts. Besides requiring large contractors to adopt subcontracting plans, the clause requires that they also compel their subcontractors that receive subcontracts in excess of $500,000 to do the same.

GSA even goes so far as to require that prospective multiple-award schedule contractors (like my client, for example) represent, in writing, that they will abide by this flow-down requirement.

Notwithstanding the foregoing, the answer to my client's question was, "No, you shouldn't have to require your subcontractors to adopt subcontracting plans."

FAR 52.212-5 identifies those federal clauses that GSA may include in a "commercial items" contract. This provision's purpose is to make government contracts more like commercial ones. To this end, the clause also strictly limits the number of clauses a contractor must incorporate into its subcontracts.

The provision provides that, notwithstanding any other FAR provision's requirements, a contractor is not required to include anything in a subcontract beyond four explicitly identified clauses. Notably, the subcontracting plan clause is not among those four. Thus, regardless of FAR's flow-down element, multiple-award schedule contractors do not have to apply that clause's requirements to their subcontractors.

Other agencies understand the relationship between the provisions. The Department of Health and Human Services, for example, explicitly notes in its model subcontracting plan that FAR's flow-down requirement "is not applicable for commercial items/services."

GSA, however, takes a different view. Consequently, contractors should be alert to the possibility that the subcontracting plan flow-down requirement could find its way into their subcontracting plans. In such a situation, the contractor should request that the flow-down provision be removed. Should this request meet resistance, it wouldn't hurt to have a copy of FAR handy with a tab stuck to 52.212-5.

Aronie is an attorney with Fried, Frank, Harris, Shriver & Jacobson in Washington, D.C., and co-author of "Multiple Award Schedule Contracting." He specializes in the federal procurement process and can be reached at (202) 639-7336.