Georgia Tech Procurement Assistance Center

5 things you should know about the ‘nonmanufacturer rule’

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To qualify as a small business under most set-aside or sole source contracts seeking manufactured products or supplies, SBA’s regulations require an offeror to be the item’s manufacturer or, alternatively, comply with the nonmanufacturer rule.

In a prior post, we discussed 5 Things You Should Know about being the item’s manufacturer; in this post, we’ll discuss qualifying under the nonmanufacturer rule.

1. Do I need to qualify under the nonmanufacturer rule?

That depends on the type of procurement you’re bidding on. Again, the nonmanufacturer rule comes into play for solicitations seeking manufactured items or supplies, and only if the offeror doesn’t qualify as the manufacturer itself.

Keep in mind, too, that acquisitions set-aside for small businesses under the simplified acquisition threshold are not subject to the nonmanufacturer rule. This exemption doesn’t apply, however, to any other socio-economic designation—for example, if it’s an SDVOSB set-aside under the simplified acquisition threshold, the offeror will have to either be the item’s manufacturer or qualify under the nonmanufacturer rule.

Keep reading this article at: http://smallgovcon.com/five-things/nonmanufacturer-rule/

SBA’s hearings and appeals office provides clarity on nonmanufacturer rule

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To be eligible for a small business set-aside procurement seeking a manufactured product, an offeror has to either be the product’s manufacturer or otherwise qualify under the nonmanufacturer rule.

Determining whether a business qualifies — either as the manufacturer or nonmanufacturer — can be a fact-intensive and confusing task. But it’s a vitally important one, as the penalty for not qualifying can be the loss of an awarded contract.

Recently, however, the SBA Office of Hearings and Appeals provided important clarity on how a small business might qualify as a nonmanufacturer.

Let’s take a look.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/sba-oha-provides-clarity-on-the-nonmanufacturer-rule/

VA class deviation restricts SDVOSB nonmanufacturers

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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.

Keep reading this article at: http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/va-class-deviation-restricts-sdvosb-nonmanufacturers/#more-7207

Nonmanufacturer rule: post-proposal substitutions don’t work

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The nonmanufacturer rule requires, among other things, that the prime contractor supply the end items of a small business manufacturer, or obtain a SBA waiver of that requirement.  Compliance with the nonmanufacturer rule is determined as of the date of the final proposal–and a subsequent switch in manufacturers won’t be recognized by the SBA.

SBA sealIn a recent decision, the SBA Office of Hearings and Appeals held that the SBA had erred by evaluating a prospective prime contractor’s nonmanufacturer rule compliance because the small business end manufacturer in question had not provided a quotation to the prime until well after the prime’s proposal had been submitted.

OHA’s decision in Size Appeal of Sea Box, Inc., SBA No. SIZ-5699 (2015) involved an Army solicitation for twelve QuadCons (a type of metal container).  The solicitation was issued as a small business set-aside under NAICS code 332312 (Fabricated Structural Metal Manufacturing).  Bids were due on September 11, 2015.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/nonmanufacturer-rule-post-proposal-substitutions-dont-work/

Deadline for comments is Feb. 27 on proposed rule affecting small business federal contracts

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Are you a small business owner doing business with the government?  As previously reported here, the Small Business Administration (SBA) recently published a proposed rule to implement Section 1651 of the National Defense Authorization Act of 2013 (NDAA), proposing to change several key areas that could impact you:

  • The performance requirements applicable to small business and socioeconomic program set aside contracts and small business subcontracting.
  • The nonmanufacturer rule and affiliation rules.
  • The performance requirements for joint ventures.

From the SBA’s point of view, the proposed regulations should benefit small businesses by allowing small business concerns to use similarly-situated subcontractors in the performance of a set-aside contract, thereby expanding the capacity of small business prime contractors and potentially enabling small businesses to compete for and win larger contracts. SBA also believes the proposed rules will strengthen the small business subcontracting provisions, which may result in more subcontract awards to small business concerns. The proposed regulations also seek to address or clarify issues that are ambiguous or subject to dispute, thereby providing clarity to federal contracting officers as well as small business concerns.

Have comments? Visit the Federal Register online for information and to submit your comments by February 27, 2015.

What you need to know about changes to the National Defense Authorization Act

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President Obama recently signed into law the National Defense Authorization Act (NDAA) for FY 2015, which provides new provisions that impact women-owned businesses. The U.S. Small Business Administration (SBA) also proposed to amend regulations implementing provisions of the NDAA Act that will impact small business contractors.

Bottom line: If you’re a women-owned small business or a small business doing business with the government, the NDAA includes a number of provisions that impact you.

Highlights of the proposed revisions to the NDAA include:

  1. Women-Owned Small Business Contracting Program:  Section 825 of the NDAA authorizes federal agencies to award sole-source contracts to women-owned small businesses eligible for SBA’s Women-Owned Small Business Contracting Program, providing parity in the federal contracting marketplace to other small business categories.  For more on the proposed rules, see SBA’s recent press release.
  2. Subcontracting:  Section 1651 changes the way that performance is calculated on small and socioeconomic set-aside contracts, and authorizes similarly situated subcontractors to count towards the performance requirements. 
  3. Joint Ventures:  Section 1651 makes the performance requirements consistent, regardless of whether or not a small business chooses to joint venture or perform in a prime or subcontractor relationship.
  4. Non-Manufacturer Rule:  Section 1651 changes SBA’s non-manufacturer rule and affiliation rules, including the elimination of waiver requests for procurements below the Simplified Acquisition Threshold (SAT) of $150,000.  The non-manufacturer rule allows a small business to offer a product, that it did not manufacture, under a small business set-aside if SBA has offered a waiver.  SBA defines affiliation as the ability to control. When the ability to control exists, even if it is not exercised, affiliation exists.

For updates on these proposed changes, visit the SBA’s website at www.sba.gov.

Federal claims court invalidates key component of SBA’s nonmanufacturer rule

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It has been the common understanding within the SBA, and the small business government contracting community as a whole, that the SBA’s nonmanufacturer rule applies only to contracts for the provision of supplies (i.e., goods) and not to service contracts, regardless of
whether or not such service contracts have a supply component. The SBA memorialized this understanding in a 2011 rulemaking. According to 13 C.F.R. § 121.406(b)(3), the nonmanufacturer rule does not apply to procurements that are assigned a services, construction, or specialty trade construction code.

The U.S. Court of Federal Claims (COFC) recently turned this common understanding about the nonmanufacturer rule on its head. In its September 19, 2014, decision in Rotech v. United States, COFC No. 14-502C (2014), the COFC invalidated 13 C.F.R § 121.406(b)(3).

Keep reading this article by clicking here  (pdf file).

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