B-228431, Nov 30, 1987, Office of General Counsel

B-228431, Nov 30, 1987, Office of General Counsel

PROCUREMENT - Socio-Economic Policies - Small Business 8(a) Subcontracting - Applicability - Prime Contractors DIGEST: Section 8(a) of the Small Business Act, 15 U.S.C. Sec. 637(a), concerning the award of subcontracts on a noncompetitive basis to socially and economically disadvantaged small business concerns is not applicable to a private corporation acting as a prime contractor for the government. The Act only applies to contracts between the Small Business Administration, as prime contractor, and a federal contracting agency.

Senator Mikulski:

This letter is in response to your August 24, 1987 inquiry concerning Dr. K.R. Shah and the alleged failure of E. I. du pont de Nemours and Company (Du pont) to offer subcontracting opportunities under sections 8(a) and 8(d) of the Small Business Act. Du pont is the Department of Energy's prime contractor at the Savannah River Plant.

Section 8(a) of the Small Business Act, 15 U.S.C. Sec. 637(a) (1982), in essence permits federal agencies to award prime contracts to the Small Business Administration (SBA) which in turn awards the appropriate subcontracts on a noncompetitive basis to socially and economically disadvantaged small business concerns. Any small business concern may apply for consideration as a participant in the 8(a) program, but eligibility for an actual award of a subcontract depends upon the "socially and economically disadvantaged" status of the owners as determined by the SBA. By the terms of the Act, a government contracting officer is given broad discretion to let the contract to the SBA upon such terms and conditions as agreed to by the agency and the SBA. In light of the broad discretion given to contracting officers, we recognize that section 8(a) authorizes a contracting approach that, in general, is not subject to the competitive and procedural requirements normally required in the award of federal contracts. Section 8(a), however, is not applicable to a private corporation acting as a prime contractor for the government. It only applies to contracts between the SBA, as prime contractor, and another federal agency. Du pont, as the DOE prime contractor, is not required by section 8(a) to subcontract to economically and socially disadvantaged small businesses.

Section 8(d) of the Act, 15 U.S.C. Sec. 637(d) directs that certain contract solicitations contain a clause requiring the contractor to submit a subcontracting plan setting forth percentage goals for the utilization of small business firms (and small business firms owned and controlled by socially and economically disadvantaged individuals) as subcontractors. Prime contractors are also required to agree to award subcontracts to the fullest extent consistent with the efficient performance of the contract. Furthermore, under certain negotiated contracts, the Act authorizes federal agencies to provide incentives in order to encourage such subcontracting opportunities as may be commensurate with the efficient and economical performance of the contract. A subcontracting plan, however, would not necessarily encompass the award of subcontracts for the type of services Dr. Shah is able to offer since a prime contractor need not subcontract all aspects of its operations if it determines that to do so would be inconsistent with efficient and economical performance. In other words, merely because a firm is available as a subcontractor does not mean that a prime contractor must subcontract with that firm, even if the firm is a small business or owned by disadvantaged individuals.

We trust the information we have provided is helpful.