Delay of GSA and DOD in Adopting Regulations Implementing P.L. 95-507

Issues were discussed concerning the delay of certain agencies in adopting regulations involving the submission of a subcontracting plan prior to the award of a contract. Legislation was passed for the purpose of expanding subcontracting opportunities for small businesses and small disadvantaged businesses by requiring large business offerors and bidders to submit formal subcontracting plans which will become part of Federal contracts. A clause in the solicitations must provide notice to the prospective offerors or bidders that they have to submit a small business subcontracting plan along with their offers or bids. The exact text of the notification clause was a matter which was left by the statute for implementation under the regulations. The legislation called for the issuance of implementing regulations by providing that an offeror or bidder shall become ineligible for award if, "within the time limit prescribed in regulations of the Federal agency concerned", he fails to submit the required subcontracting plan. The question was raised whether the failure to promulgate implementing regulations in a timely fashion would legally excuse any agency from requiring its subcontractors to comply with the law as of October 24, 1978. GAO believed that Federal agencies were required to begin the process of drafting regulations by that date, but were not required to obtain contractor compliance until the regulations were issued. The contract clauses and procedures set forth by the Office of Federal Procurement Policy in its partial implementation of the legislation were adopted as a temporary regulation by the General Services Administration on July 2, 1979, and the Department of Defense implemented the legislation on July 27, 1979. The legality of the contracts awarded after October 24, 1978, and before the issuance of implementing regulations, is not impaired by the absence of the plans. Contracts awarded after issuance of the regulations should contain subcontractor plans. Contracts which fail to contain the required plans are legally deficient, but remedies must depend on particular circumstances. Contract modifications might be appropriate under certain conditions, or contract termination might be the solution in some cases; however, if situations of urgency have arisen, it might not be feasible to remedy the problem.