Waivers to non-manufacturer rule available to small businesses

March 11, 2013 by

Small businesses participating in Federal procurements may not always be aware of non-manufacturer waivers and how a waiver may assist them in pursuing Federal contracts.

This article explains non-manufacturer waivers and what Federal agency contracting officers are responsible for.   In addition, it explains the Small Business Administration’s non-manufacturer rule (NMR).

What is the Non-manufacturer Rule?

The Small Business Act and SBA’s regulations impose performance requirements (limitations on subcontracting) on firms that are awarded Federal set-aside contracts.

Applicable regulations are:

  • 15 USC §§ 637(a)(14), 644(o);
  • 13 CFR § 125.6;
  • Federal Acquisition Regulation (FAR) §§ 52.219-14, 52.219-27

On a supply contract, a firm must perform at least 50% of the cost of manufacturing the supplies (not including the cost of materials).

The NMR is an exception to the performance requirements, and provides that a firm that is not a manufacturer may qualify as a small business on a supply contract set aside for small business if, among other things, it supplies the product of a small business made in the United States (15 USC § 637(a)(17); 13 CFR § 121.406).

What is the difference between a Manufacturer and a Non-manufacturer?

  • A manufacturer is a concern which, with its own facilities, performs the primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being acquired (13 CFR § 121.406(b)(2); FAR § 19.102(f)(1)).
  • A concern may qualify a non-manufacturer if it:
    • Does not exceed 500 employees;
    • Is primarily engaged in the retail or wholesale trade and normally sells the type of item being supplied; and
    • Will supply the end item of a small business manufacturer or processor made in the United States, or obtains a waiver of such requirement (13 CFR § 121.406(b)).

Non-manufacturer Rule Reminders

Federal contracting officers applying the Nonmanufacturer Rule are to abide by the following guidelines:

  • The NMR does not apply to service contracts. The NMR is an exception to the manufacturing performance requirements (limitations on subcontracting) applicable to supply contracts. Service and construction contracts have different performance requirements. See 13 CFR § 125.6; FAR §§ 19.102(f), 19.502-2(c).
  • Contracting officers are to designate the proper NAICS code and size standard in the solicitation, selecting the NAICS code which best describes the principal purpose of the product or service being acquired. Primary consideration is given to the industry description in the NAICS, the product or service description in the solicitation and any attachments to it, the relative value and importance of the components of the procurement making up the end item being procured, and the function of the goods or services being purchased.
  • Wholesale or retail trade NAICS code are not be applied to a procurement for supplies.
  • Non-manufacturer waivers are not granted for HUBZone procurements.
  • Non-manufacturer waivers cannot be granted after bids on a solicitation have been received.

Non-Manufacturer Waiver Information

In order to qualify as a small business on a small business set-aside, Service-Disabled Veteran-Owned set-aside or 8(a) Business Development procurement (sole source or competitive) for the acquisition of supplies, an offeror must either manufacture the item in accordance with the Limitations on Subcontracting (see FAR section 52.219-14, 52.219-27 and 13 C.F.R. section 125.6) or supply the product of a small business made in the United States. The requirement that a non-manufacturer supply the product of a small business concern is commonly referred to as the Non-Manufacturer Rule (NMR) (13 C.F.R. section 121.406). The Small Business Act also contains provisions that allow the Administrator of the SBA to waive this requirement when there are no small business manufacturers or processors available to supply the product to the Federal Government. The Administrator has delegated the authority to make decisions on waivers of the Non-Manufacturer Rule to the Associate Administrator for Government Contracting in the following cases:

  • Individual waiver. After reviewing a determination by a contracting officer that no small business manufacturer or processor can reasonably be expected to offer a product meeting the specifications (including period of performance) required of an offeror or by the solicitation; or
  • Class waiver. For a product or class of products after determining that no small business is available to participate in the Federal procurement market.

For the purpose of waivers, a class of products is defined based on the Office of Management and Budget’s North American Industry Classification (NAICS) Manual and the General Services Administration’s Product and Service Code (PSC) Directory. Within each NAICS code and PSC are subdivisions of products that can be considered for waiver. A request for a waiver of a class of products should refer to a specific subdivision, or statement of product, within the NAICS and PSC.

Any individual or organization (government agency, business, association, etc.) may request a waiver for a class of products. The request should be in writing addressed to the Associate Administrator for Government Contracting and should specifically state the class (or classes) of products for which the waiver is sought.

Requesting the Individual Waiver

Contracting officers are the only ones who can request an individual waiver for a specific solicitation.  At a minimum, waiver requests from contracting officers must include:

  • A definite statement identifying the specific products for which a waiver is being requested, including market research documentation supporting the contracting officer’s determination that there are no known small business manufacturers or processors for the requested items.
  • The solicitation number for the procurement on which the item(s) is required, the NAICS code, estimated dollar amount of the procurement, and a brief statement of the procurement history.
  • For contracts expected to exceed $500,000, a copy of the Statement of Work.
  • A determination by the procuring agency’s contracting officer that there are no known small business manufacturers for the requested items. The determination must contain a clear, narrative statement of the contracting officer’s efforts to search for small business manufacturers or processors of the item(s) and the results of those efforts. The information should include the findings of a search on the SBA’s Central Contractor Registration (CCR) “Dynamic Small Business Search” ; other market surveys performed; the results of discussions with small business representatives to find manufacturers (i.e., Office of Small Disadvantaged Business Utilization (OSDBU) Representative or Procurement Center Representative (PCR)); and, a statement by the contracting officer that there are no known small business manufacturers for the items and that no small business can reasonably be expected to offer the required supplies.
  • A contracting officer may request an individual waiver for more than one item on a solicitation. The required information indicated above must be included for each item.

Requests for waivers of the Non-Manufacturer Rule should be sent to the Director for Government Contracting at: U. S. Small Business Administration, Office of Government Contracting, Mail Code 6700, 409 3rd Street, SW, Washington, DC 20416.

Class Waivers

Anyone can request a class waiver. The requester should supply SBA with the relevant NAICS code and other identifying information concerning the item. The requester should also supply SBA with market research and other data to support a determination that no small business manufacturer is participating in the Federal procurement market.

Use the following format for submitting class waivers:

Dear Director:

In accordance with 13 Code of Federal Regulations (Reference 12l.1204(a)(2)), the (your name and/or the name of your organization) hereby requests a class waiver of the Non-manufacturer Rule (NMR) for name of product(s)_______, under the North American Industry Classification (NAICS) code _______, Product Service Code (PSC) _____.

(Describe any background information relative to the product(s) you are requesting to be waived. Include detailed information on the efforts made to identify small business manufacturers or processors for the class.)

I can be reached at ( ) ______, fax number ( ) _______, and mailing address_______.




Send to: Director, Office of Government Contracting, U.S. Small Business Administration, 409 3rd Street, SW, MC 6700, Washington, DC 20416.

Timeframes for Handling

  • A request for an individual waiver will take about 15 working days to process if the contracting officer provides complete information.
  • Requests for waivers of classes of products take an average of 45 – 60 working days for processing.

This period of time allows SBA staff to publish Waivers of the Non-manufacturer Rule in the Federal Register, a required notice of an intent to grant a waiver for the class of products, a notice on the FedBizOpps web site of potential sources sought, and a final notice in the Federal Register of any decision to grant the waiver if no small business manufacturers or processors have been identified.

For questions about the Nonmanufacturer Rule, or questions on how to submit a waiver request, please contact SBA’s Edward Halstead  at vog.absnull@daetslah.drawde

Sequestration’s impact on state and local government procurement explained

March 8, 2013 by

Govpro has offered opinions and views on the impact of sequestration from  several officials, including AmyClaire Brusch, vice president in O’Neill and  Associates’ federal relations practice, and Mattea Kramer, director of research at the National  Priorities Project.

Here are the views on sequestration’s impact on government budgets from  Michael McGill, a partner, and Peter Dungan, an associate, at the  Washington-based Hogan  Lovells law firm.

Govpro: Will state and local governments be  affected by sequestration?

Michael McGill and Peter Dungan: Certainly. Unless averted again,  sequestration will mean automatic, across-the-board cuts in federal civilian and  military discretionary and mandatory funds starting soon after March 1. The most  unique aspect of sequestration under the Budget Control Act of 2011 is not the  magnitude of the spending cuts but the indiscriminate nature of them.

This so-called “meat cleaver” approach threatens funding under several major  programs that benefit the states, from education and child nutrition to  transportation infrastructure and public health to military readiness and law  enforcement. Very few programs are exempt from the automatic cuts (Medicaid and  food stamps are among them, while Medicare cuts cannot exceed 2 percent).

Keep reading this article at: http://govpro.com/federal/content/Sequest-McGill-20130305/

Small business certification is a thorny issue

March 5, 2013 by

The ever-evolving small business government contracting landscape presents myriad ethical quandaries for small businesses seeking set-aside and sole source contracts.

Rules governing eligibility for various small business programs are becoming more complex with amendments and case law interpretation.  Hence, whether a firm is eligible for a particular small business program or procurement often presents a thorny question.

Small business government contracting programs generally rely upon a contractor’s self-certification. To
compete, a company usually only needs to certify — with no government verification — that it meets a small business program’s requirements.

Notable exceptions include the Small Business Administration’s 8(a) business development program and Historically Underutilized Business Zone (HUBZone) program and the Department of Veterans Affairs’ Veterans First contracting program for Veteran-Owned and Service-Disabled Veteran-Owned Small

Keep reading this article at: http://www.nationaldefensemagazine.org/archive/2013/march/Pages/SmallBusinessCertificationaThornyIssue.aspx

New Defense legislation is a mixed bag for small business

February 27, 2013 by

The 2013 National Defense Authorization Act included several provisions related to small businesses, which include expanded opportunities as well as potentially harsher penalties for failure to follow regulations.

Although other agencies have created similar programs, the Small Business Administration (SBA) mentor-protégé program provides firms of all sizes with a number of benefits.  The new legislation helps small businesses that are part of this program and subcontractors to large firms.

The current arrangement is, however, limited to businesses that are accepted into the 8(a) program — a subset of small business set-asides that are limited to firms which are owned by economically or socially disadvantaged individuals who go through an SBA certification process.

Keep reading this article at: http://www.nationaldefensemagazine.org/archive/2013/march/Pages/NewDefenseLegislationaMixedBagforSmallBusiness.aspx

Procurement Opportunities Guide now available at no cost

January 30, 2013 by

The 2013 edition of Braddock’s Procurement Opportunities Guide, An Entrepreneur’s Guide to Selling to Governments and Corporations, is now available to GTPAC clients at no charge!

Braddock’s Procurement Opportunities Guide is a primer designed to help small business owners and decision makers understand the government procurement and private sector procurement spaces.  The Guide provides an overview of government and corporate markets with an emphasis on who buys and how buying decisions are made.  The Guide also presents “next step” resources for federal and state governments and the private sector.

Topics covered by the Guide include:

  • Selling to the federal government/state governments
  • Selling to large corporations
  • Selling to foreign governments and international organizations
  • “Green” procurement
  • Special resources for Women-, Minority, and Veteran-owned businesses
  • A glossary of procurement related terms, a procurement preparation checklist, information about teaming agreements and joint ventures, and more.

Braddock’s Procurement Opportunities Guide is published and copyrighted by Braddock Communications, Inc.  This special PDF edition of Braddock’s Procurement Opportunities Guide is available at no charge to you thanks to the generous support of Microsoft Corporation.

Download the Guide here: https://netforum.avectra.com/eWeb/DynamicPage.aspx?Site=APTAC&WebCode=PUBPOG


Looking for help with government contracts, but not located in Georgia? There’s help available

January 29, 2013 by

The Georgia Tech Procurement Assistance Center provides help to businesses located in Georgia.  But what if your business is loacted in another state — is there help available for you, too?

The answer is yes!   There are what are known as Procurement Technical Assistance Centers (PTACs) located in all 50 states, and each one is in business to provide assistance to businesses on how to identify, compete for, and win government contracts.

You can find the complete list of PTACs nationwide at http://www.aptac-us.org/new/Govt_Contracting/find.php.  On this web site, just select a state or click on the map to find complete details on the PTAC nearest you.

Changes to GSA Schedules program likely in 2013

January 29, 2013 by

Anyone monitoring government contracting in the last few years has noticed a surge in U.S. General Services Administration (GSA) Schedule contracts. As of fiscal year 2012, GSA had over 19,000 Schedule contracts. According to GSA, approximately 10% of federal procurement dollars went through GSA Schedule contracts last year representing nearly $50 billion in spending.  Considering 80% of GSA Schedule contracts are with small businesses, proposed changes to the GSA Schedule program in 2013 will surely impact small businesses.

The first of these changes, spearheaded by SBA, intends to ensure more small businesses reap the benefits of the GSA Schedule program. While small businesses represent 80% of GSA Schedule contract holders, only 36% of contract sales go to small businesses.

Keep reading this article at: http://www.pilieromazza.com/includes/content/downloads/download.php?id=750.


More contractors see decline in federal revenue

January 29, 2013 by

For the first time in a long time, more federal contractors reported decreases in their government contracting revenue last fiscal year than those who saw increases, according to a Grant Thornton survey of about 100 contractors.

Thirty-eight percent of contractors suffered reductions in revenue over the past year, compared with 36 percent that saw revenue increases and 26 percent that experienced no significant change, according to the annual Government Contractor Survey released last week. Professional Services Council sponsored the survey.

“This year’s survey shows more revenue shrinkage than growth and a plunge in net profit, with the majority of contractors seeing a tiny profit or none at all,” the survey said. “This despite reducing headcount and overhead, holding wages at generally the same level as in the last two years, cutting [general and administrative expenses] and benefits, and doing just about all a company can do to sustain profits. Contractors are up against costs that can’t be slashed and must be absorbed: indirect, health care, overtime and, for many, out-of-scope work.”

Keep reading this article at: http://blogs.federaltimes.com/federal-times-blog/2013/01/24/more-contractors-see-decline-in-federal-revenue/.

New responsibilities placed on contractors subject to the Service Contract Act

January 23, 2013 by

Pursuant to a rule finalized by the the Federal Acquisition Regulatory (FAR) Council, effective January 18, 2013, contractors who win the right to take over a previous federal service contract now must make a first-right-of-refusal employment offer to workers on the earlier contract.  The new rule applies only to contracts that are subject to the Service Contract Act (SCA).

The new rule implements Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts, dated January 30, 2009. The FAR has been amended to add subpart 22.12 and a new clause at FAR 52.222-17.

The new requirement applies when the successor contract is for same or similar services at the same location as the predecessor contract.  29 CFR 9.2 defines “same or similar service” to mean “a service that is either identical to or has one or more characteristics that are alike in substance to a service performed at the same location on a contract that is being replaced by the Federal Government or a contractor on a Federal service contract.”

An exception to the right-of-first-refusal requirement involves the successor contractor’s current employees, who would otherwise face termination themselves, are qualified for the new contract and subject to SCA.  Another exception is for predecessor employees with documented past unsuitable performance. In addition, if the successor contractor will be working with a smaller workforce than the predecessor contractor to achieve greater efficiency, the successor is only required to offer employment to those eligible employees who would be qualified to fill the positions that will exist on the new contract.

If a successor wins a contract award due to a contract terminated for performance reasons, the successor contractor is not to assume it was the fault of the service employees; the assumption to be made is that the employees were performing suitable work in support of the contract and the fault lay with management. If the Government determines that the poor performance of the predecessor contract was due to the entire predecessor workforce, then the new SCA rules may be waived.

FAR 52.222-41(n) already requires the predecessor contractor to provide to the contracting officer a certified list not less than 10 days prior to completion of an existing contract of the names of all service employees on the contractor’s or subcontractor’s payroll during the last month of the contract performance.  This list must contain the anniversary dates of employment on the contract. Under the new rule, this list will be required no less than 30 days prior to completion instead of 10. If the list is not provided, the Government will have the right to suspend contract payments until it is provided.

SAM problems linger: WOSB and EDWOSB designations may not display

January 14, 2013 by

Ever since last year’s launch of the System for Award Management (SAM), the federal database that replaced Central Contractor Registration (CCR), there have been a myriad of problems involving system stability, data entry by vendors, access by users, and data migration from CCR to SAM.  Over time, some of these issues have been resolved.  However, new problems have arisen, and the latest one that has come to our attention could effect the eligibility of women owned businesses for federal contract set-asides.

It’s come to the attention of the Georgia Tech Procurement Assistance Center (GTPAC) that SAM may incorrectly omit a company’s Women-Owned Small Business (WOSB) and the Economically Disadvantaged Small Business (EDWOSB) designation. This means some small businesses that are legitimate WOSB/EDWOSB concerns are unable to visibly display their status in SAM at this time.   Reports indicate that the Small Business Administration (SBA) has called this latest challenge to the attention of the General Services Administration (GSA), SAM’s administrator.

Until this problem is resolved, GTPAC recommends that WOSB and EDWOSB firms  familiarize themselves with the procedure by which a federal Contracting Officer is to verify a firm’s WOSB or EDWOSB status so that, if necessary, suggestions can be made to the Contracting Officer.

The Code of Federal Regulations (CFR) at CFR 127.301(2) indicates that a Contracting Officer may accept a concern’s (bidder or proponent) representation as a WOSB or EDWOSB if the apparent successful offeror provides the appropriate documentation, as described in §127.300(e) at the time of initial offer.

Here are three ways a Contracting Officer can verify a WOSB/EDWOSB concern’s legitimacy:

  1. If an WOSB/EDWOSB concern has a valid certificate from one of SBA’s four approved third party certifiers (i.e., El Paso Hispanic Chamber of Commerce, National Women Business Owners Corporation, U.S. Women’s Chamber of Commerce, and Women’s Business Enterprise National Council), the concern can submit the certificate along with a signed copy of SBA form 2413 Woman-Owned Small Business (WOSB) or SBA 2414 (EDWOSB) form to the Contracting Officer to validate the concern’s eligibility status.  Furthermore, the WOSB/EDWOSB concern must have the same documentation uploaded into SBA’s WOSB Repository at the time of initial offer.  (Under no circumstances are certifications to be accepted from parties other than the four organizations approved by the SBA; in other words, state certifications or any other forms of certification are not to be considered or accepted.)
  2. The WOSB/EDWOSB concern may submit a hard copy (signed) of all the required documents mandated by in the Code of Federal Regulations 13 CFR 127.300(e) and a signed copy of SBA WOSB form 2413 or to the EDWOSB form 2414,  for verification of WOSB/EDWOSB status.  These records are to be maintained for six years in the contract file.
  3. If the WOSB/EDWOSB concern is also an SBA-certified 8(a) concern, the concern may submit a copy of the SBA 8(a) BD Participant certificate and the signed SBA WOSB form 2413 or to the EDWOSB form 2414.

In all instances, the Contracting Officer must verify a concern’s status in SBA’s WOSB Program Repository.  It is the obligation of the WOSB or EDWOSB to provide current, accurate and complete documents to the Contracting Officer for each contract award.

Ultimately, it is the responsibility of the Contracting Officer to verify WOSB/EDWOSB status.  If the Contracting Officer has information that calls into question the eligibility of a concern as an WOSB/EDWOSB, or the concern fails to provide all of the required documents to verify its eligibility, the Contracting Officer is to not award a WOSB/EDWOSB contract to that business concern.

Regardless of how a business concern is listed in SAM, Contracting Officers should affirm the status of WOSB and EDWOSB concerns by checking their documentation online in the WOSB Program Repository per 13 CFR § 127.300(c).  Apparent awardees can only provide access to those Contracting Officers who are registered for the WOSB Program Repository.  Contracting Officers should go to: https://eweb.sba.gov/gls/dsp_login.cfm and click on “Request SBA User ID” to establish an account.

Any WOSB/EDWOSB who encounters questions because a Contracting Officer cannot identify a firm as a WOSB or EDWOSB in SAM should communicate the foregoing procedural information to the Contracting Officer.

GTPAC’s sister organization, The Contracting Education Academy at Georgia Tech, has created a presentation that addresses various issues involving the System for Award Management (SAM), including helpful tips and work-arounds for both the vendor and acquisition communities.  To download a copy, please click here.