The VA has adopted a Class Deviation to the VAAR, severely restricting the ability of VA Contracting Officers to request waivers of the nonmanufacturer rule–and, even more troubling, suggesting that Contracting Officers need not apply the statutory SDVOSB and VOSB preferences even when the SBA has already granted a class waiver.
You may be wondering “does the VA’s Class Deviation comply with Kingdomware?” Good question.
Before diving into the details of the Class Deviation, let’s step back for a second to review why this is so important.
Under the SBA’s regulations, when any contract is set-aside for small businesses (including SDVOSBs and VOSBs) under a manufacturing NAICS code, there are two ways that the prime contractor can satisfy the requirements of the limitations on subcontracting. As one option, the prime contractor can agree to pay no more than 50% of the amount paid by the government to it to firms that are not similarly situated. In other words, the prime can do most or all of the manufacturing itself (or work with similarly situated small businesses). Alternatively, the prime can sell the products of another business, so long as the prime qualifies as a nonmanufacturer.