The Mandatory Small Business Subcontracting Test:

Considerations for Public Law 95-507's New Subcontracting Program

PSAD-79-66: Published: May 11, 1979. Publicly Released: May 21, 1979.

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A review was conducted of the Mandatory Small Business Subcontracting Test and new legislation which established a new small business and small disadvantaged business contracting program. Basic similarities between the test and the new legislation include the intent to increase small business subcontracting, the use of goals for small business subcontracting, and the use of incentives in negotiating procurements to increase small business subcontracting.

The way in which the test was conducted prevented an evaluation of mandatory small business subcontracting. Useful information for test purposes was not provided and some contracts were not completed sufficiently to evaluate the results. Procedural defects in the test may be avoided in implementing P.L. 95-507 subcontracting program because of the establishment of an Office of Small and Disadvantaged Business Utilization in federal agencies which have procurement authority. Several problems identified in the test procurements require consideration during the implementation of the subcontracting program. There is a lack of a clear and consistent definition for the term subcontract in solicitations and contracts. Difficulties exist with using incentives to increase small business subcontracting. Procuring activities lack adequate data and methodology to prepare goals for inclusion in solicitations which would increase small business subcontracting.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should amend the law to exempt low bidders and successful offerors on procurements for commercial items from submitting subcontracting information on individual contracts.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Administrator for Federal Procurement Policy should define the term subcontract for in use in P.L. 95-507 subcontracting program and require the inclusion of the definition in solicitations and contracts, and instruct agencies to provide the rationale for a particular subcontracting incentive provision in their memorandums of negotiations. As a minimum, the information required should include the level of contracting participation contained in the prime contractor's proposal for small business concerns, and the subcontracting participation level at which incentives will be provided.

    Agency Affected:


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